Retail property is probably the most difficult property development sector to consistently achieve successful results. This is because shoppers' tastes and needs change very rapidly. A retail development concept that worked well five years ago may not succeed today.
Retail development has also become tougher and will continue to be so, because of the threat from e-commerce which bypasses the need for bricks-and-mortar stores. This does not mean that retail development has become obsolete; "clicks" or online shopping will not totally replace "bricks".
It means that the speed of change has accelerated. We can see that in the Bangkok retail market where 30 years ago, the retail mix consisted of traditional markets, a few department stores and shophouses. The Central Group opened its first department store in 1956 in Wang Burapha. Central also opened Bangkok's first large-scale shopping centre, Central Plaza, in Lat Phrao in 1982.
As of the second quarter of this year, Bangkok had 7.2 million square metres of modern shopping property, including large shopping centres, "big box" stores and community malls.
Unlike many other cities, Bangkok does not have very much "high street" retail of ground floor shops driven by pedestrian flow, partly because of climate, and also possibly due to the condition of Bangkok's pavements. There is no equivalent to London's Regent Street in Bangkok.
Retail formats are constantly changing globally. For example, the growth of "big box" stores has slowed as customers' shopping habits changed back to more frequent daily shopping.
In the past, building a shopping centre to a high specification and filling it with luxury brands worked well in many countries; this is not the case now.
Consumer's tastes and shopping patterns are changing. E-commerce is disruptive, in some cases relegating the physical store to a showroom where consumers see the product and then hunt for the best deal online.
So how can retail developers succeed in this rapidly changing environment? Several of the key factors should lead to the creation of an experience that is not available online such as food and beverage. Eating with a group of friends is much more fun in a restaurant rather than ordering food online and eating at home, especially if you live in a 35-square metre one-bedroom condominium.
Having tenants that provide products that are not available elsewhere, making the centre a "must-go" destination, is a unique selling factor. Ikea is a great example of this with the range of goods it offers; and Ikea is one of the few tenants where consumers will travel more than 50 km to go to a store.
Tenant selection and mix are therefore key factors, but as the type of tenant changes so do the tenant's size and specification requirements. The design of the building needs to be flexible enough to cater for a range of potential layouts that will change over time.
In some countries, diversifying away from the traditional merchandise mix has become necessary. Sluggish growth and recent declines in sales at some department stores, the traditional anchor of shopping centres, are driving landlords towards non-traditional anchors such as specialist grocery stores, restaurants and entertainment venues.
Consumers want a unique experience so even apparel tenants are starting to create a "non-chain" feel to their stores so that each store is different.
Providing customers with outlets with a wide range of price points is also becoming more common, whereas before a traditional retail project might be aimed at a single income group, for example, solely luxury brands.
Changing consumer tastes and habits are what make retail property development more complex than other property uses.
Landlords have to constantly adapt to the changing environment and tenants, and create a unique experience so that they can compete not only with other shopping centres but also with e-commerce.
A History of Modern Retail Development in Bangkok
| 1956 | Frist Central Department Store | Central Wangpurapha |
| 1969 | Ploenchit Arcade | Retail and office (now demolished and redeveloped as a condominium) |
| 1979 | Central Chidlom | Rebuilt after a fire in 1995 |
| 1977 | Siam Center | Renovated several times |
| 1982 | Central Plaza Ladprao | The first modern large-scale shopping center in Bangkok |
| 1983 | Mah Boon Krong | Tokyu Department Store, shopping center and office |
| 22 Dec 1983 | The Mall Shopping Centre Ramkhamhaeng Branch | Department store and shopping centre |
| 1985 | Amarin Plaza | Shopping centre, former Sogo Department Store and Office |
| 1985 | Peninsula Plaza Rajdamri | Shopping centre |
| 1988 | First 7-Eleven store opens | First modern convenience store |
| 1989 | Makro cash and carry | First wholesale shopping centre |
| 1993 | First Central Superstore (later named Big C in 1994) at Wong Sawang | Superstore |
| 1994 | First Tesco Lotus at Seacon Square | Superstore |
| 1994 | First community mall by Siam Future | Community mall |
| 1997 | Emporium | Shopping & lifestyle centre |
| 2002 | Central World's completion of renovation and expansion of the World Trade Centre | Shopping & lifestyle centre by the Central Group |
| 2005 | Siam Paragon | Shopping & lifestyle centre by Siam Piwat |
| 2010 | First IKEA, Mega Bangna | Household goods and furniture |
| 2014 | Central Embassy | Luxury shopping mall by the Central Group |
| 2015 | EmQuartier | Shopping & lifestyle centre by The Mall Group |
James Pitchon is head of research and consulting at CBRE Thailand. Facebook: CBRE.Thailand Twitter: @CBREThailand LinkedIn: CBRE Thailand
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