Regional Market Analysis

The retail landscape in Southeast Asia is poised for robust growth in 2024, fuelled by a resurgence in the tourism industry. However, retailers face persistent challenges; particularly elevated operational costs influenced by the dynamic global environment. In this context, strategic decision-making becomes paramount to mitigate the risks associated with costly missteps.

Insights from Market Friction Analysis:

All four markets (Singapore, Malaysia, Vietnam, Thailand) saw an increase in friction, with the highest increase witnessed in Vietnam (40.1% month-on-month) and the smallest increase in Singapore (4.5% month-on-month).
The improvement in friction observed in Malaysia, Vietnam and Thailand in March was the second consecutive monthly increase, while the Singapore rebound in friction in March came at the back of seven straight months of decline in friction.
The demand for rental retail properties went up for all four markets. Singapore, Thailand and Vietnam witnessed double-digit growth in demand, while Malaysia saw a more muted increase of 5.8%.
The supply of listings for rental properties in Malaysia, Singapore and Thailand rose in March 2024, but the supply in Vietnam decreased for the second consecutive month by 23.3%.

Market Friction: A key indicator for informed business decisions.

Market Friction, measured by the demand-to-supply ratio, signifies the gap between demand and supply in the retail property market. Crucial for retailers, mall owners, and investors, it guides decisions on occupancy rates, rental income, growth, and risk. By evaluating the leading indicators from our proprietary indices, businesses can access insights for strategic, sustainable decisions, ensuring long-term competitiveness.

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Southeast Asia: Singapore, Malaysia, Thailand and Vietnam

Figure 1: Market Friction

Analysis of market friction in retail property rental transactions

The change in friction could be attributed to shifts in both supply and demand (Figure 2). In March, there was an increase in the supply of retail property rentals in Singapore, Malaysia and Thailand, with Singapore witnessing the highest increase in supply by 10.0%. Vietnam, however, saw a drop in the number of listings as measured by the Supply Index.

All the markets show an increase in demand, with Vietnam witnessing the most significant increase in demand, rising by 19.6% month-on-month. This is followed by Singapore, which saw an improvement in demand by 16.1% month-on-month. Thailand also saw a double-digit growth in demand month-on-month, whereas the demand growth in Malaysia is relatively subdued, increasing by 5.8% month-on-month.

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Figure 2: Rental Supply and Demand Index

Supply and demand trends derived from listing data and unique visitor data on PropertyGuru’s platforms

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Figure 3 examines individual urban centres across the four markets and demonstrates some interesting trends. Ho Chi Minh City and Hanoi continued to have very high friction, as it remains a landlord market. In contrast, the retail space friction in Malaysia's urban centres seems relatively stable over the past year.

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Figure 3: Market Friction in Urban Centres

Supply and demand trends derived from listing data and unique visitor data on PropertyGuru’s platforms

Our Foreign Demand analysis on DataSense (Figure 4) indicates that two out of the four urban centres in Malaysia rank within the top 3 in terms of foreign interest. Searches and views of retail property rental listings as well as outreach to agents and developers outside the home country track this interest. This heightened interest coincides with announcements regarding the progressive completion of the Rapid Transit Link between Singapore and Johor, as well as the potential revival of the High-Speed Rail.

Singapore

Singapore's demand for retail space has been declining since September 2023 but rebounded in March 2024 (Figure 5) by 16.1%. Supply, separately, increased for the third consecutive month, extending the increase with a 10% increase in March 2024.

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Figure 6 shows that the monthly median asking rental index for shops or shophouses improved after a dip towards the end of 2023. Overall, the level of asking rents has stayed stable, albeit with fluctuations.

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When we looked closely at different districts, we found that District 20 - Ang Mo Kio/ Bishan/ Thomson had the highest friction, scoring 2.83. The friction in this district's retail property rental market increased considerably over the past month.

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Malaysia

Malaysia's retail property rental demand went up by 5.8% month-on-month, rebounding from a 1.8% decline in February. The supply for retail property to rent in Malaysia also rose by 2.2% month-on-month.

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While the friction has increased in March 2024, the monthly median asking rent for retail shops in Malaysia mainly stayed the same compared to the previous month. Still, they were significantly higher than a year ago. Figure 9 illustrates that retail property rental trends have remained stable over the past year.

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The district with the highest rental market friction is SS2, Selangor, which saw a month-on-month increase by 26% in the past month.

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Thailand

Thailand has the second highest friction for retail space across the four markets in March. The rental market for retail property has steadily tightened, with a market friction increase of 10.2% compared to the previous month. The improvement was driven by higher demand growth and contraction in supply. However, despite the uptick in demand seen in the first three months of 2024, it could not offset the previous months’ drop in demand, resulting in friction levels remaining lower than a year ago.

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As shown in Figure 12, median monthly asking rent for retail property in Thailand have remained mostly stable since September 2023.

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Among the districts in Bangkok, Bang Kapi had the highest retail property rental friction at 6.35, with a considerable increase from February. The increase in friction could have been catalysed by the transformation of The Mall to The Mall Lifestore Bangkapi (Bangkok Post - Bang Kapi's Lifestore unveiled).

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Vietnam

Figure 14 shows that the market friction in Vietnam's retail property rental market increased in March 2024 and was higher than the friction a year ago. Tenants would find the retail landscape more competitive due to decreased listings for retail property rentals. Similarly, demand rebounded after declining for three months, staying elevated above the level of demand a year ago.

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Overall, the median monthly asking rent per square foot for stores/ kiosks has been stable month-to-month.

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When we analyse the districts in Vietnam's major urban centres - Hanoi and Ho Chi Minh - as shown in Figure 16, Cau Giay district in Hanoi exhibits the highest market friction for retail property rental at 13.55 in the country. Cau Giay is considered one of the central districts of Hanoi, connecting critical parts of the city with developing outskirts. With numerous emerging industrial zones and new urban areas, the demand for retail spaces in Cau Giay is driven by ongoing development and growth.

Quarterly Retail Snapshot: Q1 2024