Increased Activity in the Retail Sector

Bangkok--Aug 28--CB Richard Ellis (Thailand) There has been increased activity among retail developers as new projects are planned and refurbishment of existing centres continues to improve performance and capture more customers, according to international property consultants CB Richard Ellis. A number of new projects have been launched in recent months in both Bangkok and upcountry areas. The joint venture of The Mall Group and Bangkok Intercontinental Hotels Corp. (BIHC), the developer of the Siam Centre and Siam Discovery Centre, have recently launched Siam Paragon, which will have 300,000 sq.m. of retail space and is slated for opening in 2005. The project's strategic location in the heart of Bangkok's central business district (CBD), the direct access to the BTS Skytrain and its large area land area within the city's prime retail and tourist zone is expected to make the project a destination centre. According to the developers the project has already attracted the interest of retailers, both local and foreign. Meanwhile, construction continues at the Central Rama II shopping centre, which is now reportedly 90% let. The project's developer expects the centre to open by the end of 2002. Central Retail Corporation also plans to launch Central Phuket, a 50,000 sq.m. shopping centre in Phuket near Tesco Lotus and Big C. This centre will have retail, entertainment and themed restaurants. Construction is approaching completion for the All Seasons Place retail centre, an upmarket destination centre catering to the residents and office workers within the CBD. The 14,000 sq.m. centre is now 80% let and is expected to open in October 2002. According to Khun Asharawan Wachananont, Senior Director for Retail Services at CB Richard Ellis, there is now a very limited supply of shopping centres in prime locations, and this has prompted some developers to embark on new developments in various areas of Bangkok and to explore opportunities in Thailand's major tourist areas such as Phuket, Samui, Pattaya and Chiang Mai. The expansion plans of some retail tenants are curtailed by the limited supply available, and this explains the quick leasing of new retail space that becomes available in the market, according to Khun Asharawan. Ms. Amy Rodil, Research Director at CB Richard Ellis said that the total supply of grade A retail space in Bangkok as of the second quarter of 2002 stands at 2.2 million sq.m. of which only 2% is vacant. On the other hand, grade B centres had a 19% vacancy. Retail tenants prefer to be in a grade A centre where most outlets are occupied, management and building design/ circulation is good, and the retail concept is successful, thereby generating a high customer traffic. Bangkok Retail Market, Q2 2002(In million sq.m.) Grade A Grade B Total Market Total Supply 2.2 1.55 3.75 Total Occupied 2.15 1.25 3.41 Occupancy Rate 98% 81% 91% Source: CB Richard Ellis Research The tight supply and increasing demand has led some retailers to take on space in shophouses that are located near the prime retail and tourist areas. Such supply and demand conditions have led to rents increasing not only in shopping centres but in shophouses in prime locations such as those along Silom Road and Siam Square. With the new retail projects coming online, some developers have seen the need to refurbish their centres to remain competitive. The 12,600 sq.m. newly-renovated Gaysorn had a soft opening in July 15 and is scheduled to have a formal launch in September 21, 2002. The project has secured premium international retail brands in keeping with its new concept as a premium brand shopping centre. The project is developed by jointly by GS Property Management and Hong Kong Land and now has walkways linked to the BTS Chidlom station, thereby improving the centre's access. More retail centres are expected to be refurbished to improve performance and remain competitive in anticipation of the new supply to the market. Khun Asharawan said that there is also more activity among retailers offering home improvement products, furniture and decorative items because of the increasing demand for housing. Specialty store operators such as Home Pro and Home Works are expanding and new sites in suburban Bangkok are now under construction. New retailers also continue to enter the Bangkok retail scene with the continuing improvement of Thailand's general economic conditions and the purchasing power of consumers. International brand food and beverage operators and restaurants as well as those in the fashion business are now considering opening new outlets in Bangkok if they can find the right location. According to Ms. Rodil, the purchasing power of consumers in Bangkok has grown over the past year. Based on the figures compiled by the Bank of Thailand, total retail sales in Thailand increased by 12% from 304 billion baht in first four months of 2001 to 342 billion baht during the same period in 2002. Moreover, the number of credit cards issued has gone up by 40% from 1.89 million as of March 2001 to 2.68 million as of March 2002. The sharp rise was due mainly to the removal of the 15,000 baht per month salary requirement for card applicants. As the number of credit cards increase the potential for retail sales and the purchasing power of consumers in the future is expected to rise further. As economic conditions improve, there will be increased activity in the retail market in Bangkok as well as in upcountry areas. This creates opportunities for developers and more retail development and refurbishment plans are expected to be firmed up in the coming years. However, CB Richard Ellis believe that only those centres that are in the right location and providing a concept suited to the requirements of the more discriminating shoppers will become successful. For further information: Ms. Asharawan Wachananont Ms. Amy Rodil Senior Director, Retail Services Director, Research Department Tel: 231-0123 Ext. 401 Tel: 231-0123 Ext. 602 End. -SN-

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