FRIDAY, March 29, 2024
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Putting in perspective the rise of mixed-use projects in the region

Putting in perspective the rise of mixed-use projects in the region

Mixed-use projects are growing, not only in Thailand but also in many Southeast Asian markets. Christian Olofsson, shopping centre & mixed-use director of IKEA/Southeast Asia, talks to The Nation about the trend and challenges of mixed-use property development in the region.

Why have so many retail spaces or property projects in Thailand adopted the mixed-use concept?

The competitive environment is changing and new-retail is on the rise, meaning that in many cases the traditional retail formats and stores are undergoing and about to change even more in the future. All of this is forcing developers to rethink assumptions about the industry, and the necessity of incorporating nontraditional elements such as housing, entertainment, and healthcare into retail spaces is one way to stay relevant for the consumers of tomorrow.
What is in it for the customer: Culture and lifestyle play significant roles in shaping a commercial development. As a result of urban density and the size of housing, we see more friends and families eating meals in a restaurant than at home. And because of the climate and in some cases poor air quality, indoor sporting facilities, kids entertainment and kids’ education venues, are very popular. Urbanisation also leads to an emergence of new communities and consumer groups looking for products and services that are not only original but able to answer their needs more effectively. Time is simply becoming more and more limited, so people simply want to shop and socialize close to the places where they work, go to school and live.
What is in it for the developer: There is a potential higher return on the investments when considering mixed-use projects; if the opportunity is optimized and the developer can be effective in responding to more needs than their single-use counterparts. A mixed use concept can also be less risky, have a greater variety of revenue sources, and can help average out the land costs by integrating a mix of components with different types of returns.
 
What is the trend and growth of mixed-use projects in Thailand and Southeast Asia? What are the supportive factors and opportunities?

The growth in mixed-use projects will raise competition within the property market as they can better meet the needs of consumers. Large-scale mixed-use projects that are currently close to completion will increase retail commercial and office space by 550 thousand square meters and 660 thousand square meters by 2025, as well as increase the supply of high end hotels and condominiums.
 
What are the key ingredients for a successful mixed-use development project, the live-work-play environment concept?

A more productive use of space, mixed-use developments bring about land use synergies. Combining multiple uses within a single development allow developers to share common resources within the overall development, lowering development costs and maximising the use of land
 Prominent design and synergistic integrated components are part of success factors of large-scale mixed-use projects as this will differentiate the project and enable it to become a new landmark for the market area, city, country or even the entire region.
Developers in Thailand will likely seek business partnerships to develop large, more complex, and more valuable mixed-use projects. As the modern urban population demand greater convenience in their daily lives. Amid a limited supply of good potential property, large-scale mixed-use project developments will become increasingly popular.
Population projections: Mass Transportation to help generate traffic in the projects. Where American site selection strategies are often based on adjacency to highways or other main roads, in Asia proximity to foot traffic and transportation hubs are the leading drivers of where shopping centers and mixed use developments are built. 
In your view, what are the challenges facing mixed-use project developers both in Thailand and the region?
As for all projects, there are challenges for the mixed-use concept, such as financial management, finding large and suitable development sites, and striking the right balance between residential, commercial, and other types of components.
In addition, each component within the development must complement the other and work well together, both short term and long term. Retailers benefit from a steady flow of foot traffic drawn from residential occupiers, hotel guests and office tenants. Residents gain from the convenience of having retail, leisure and Food & Beverage right on the door step. For office tenants, the diverse mix of offerings within mixed-use developments undoubtedly raises the appeal of office space to their staff. The presence of hotels and residential units within the same development provides an added benefit for office workers and visiting guests. All these also reflect mixed-use development's ability to serve increasingly demanding consumers in an urban lifestyle.
 
What are their strategies set to overcome such challenges? 

Significant efforts needs to be put into the market research and understanding of the targeted consumers, clients and customer demographics. The ability to analyse the current market situation, and also predict the behaviour and needs of people in the future, is crucial for a successful project.
Simple yet innovative design and solutions to stimulate maximum flow between functions.
Effective project management is also extremely important to secure the anticipated returns and ensure the different components live up to the expectations in the investment requests and feed off each other to create synergies and desired benefits. 

Please give an update on the Megacity mixed-use project.

We continue to invest into this destination but also actively looking for investment partners and developers that share our ambition and also see the opportunities presented here. We have land available for both freehold and leasehold and also open for discussions about joint projects.
The Megacity first extension phase ‘Mega FoodWalk extension’, 10,000 sqm, and a 7-storey-carpark building, opened in December 2017. With this extension, we have strengthened our total food offer by providing more than 160 restaurants to our customers.
The first “Marvel Experience” in Southeast Asia, offering customers an interactive entertainment park, opens in May 2018.
The international preparatory school “Didyasarin” affiliated with American School of Bangkok, opening their doors in August 2018
A new 10,000 sqm extension, focusing on kids’ education and fun activities will open in 2019, aiming to further strengthen Megabangna’s focus on a family friendly offer.
A large green space called “Mega Park” where our customers can spend their quality time with families and friends for recreation and leisure in a green environment will open in 2018. 
In addition, the centre has improved road infrastructure and extended its surrounding Ring Road, with its aim to cater for the increasing car traffic demand of its future development projects. 
 
May I have the details of your plan to develop mixed-use projects in Thailand? 

Our focus is on transferring Megabangna into Megacity, this is our biggest task in terms of our projects in Thailand at the moment. We are open to more projects but we have no new announcements to be made at this point. We are also busy building large IKEA stores, shopping centres and meeting places in Malaysia, Philippines and investigating other potential new markets in Southeast Asia.
 
What is the plan for more IKEA stores in Thailand, including the latest one at Central Westgate?

We see great potential in Thailand to provide home furnishing solutions that help people live a better life at home. The IKEA Bangna store opened 7 years ago and we just celebrated the grand opening of our second store in March, IKEA Bangyai, connected to the Central Westgate shopping centre in a western suburb of Bangkok. There is still a lot of people in Thailand that does not have easy access to purchase IKEA products and we are looking to continue to expand to provide more people with the opportunity to purchase well designed furniture from Sweden at an attractive price.
 

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