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q4 2012Manufacturing Property Market
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• DemandoftheindustriallandsinEasternSeaboardhasbeenevidentlyincreasingsinceflood2011.
• ForeignDirectInvestmentislikelytocontinuetoflowintoThailandin2013.
• Locationsthatenjoythebestlabouravailabilityandlogisticsinfrastructurewillcontinuetobethemostpreferredareas,especiallyiftheydidnotfloodin2011.
highlights
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Q4 2012Manufacturing Property Market
demand RecentsurveysofmanufacturingfirmsbytheBankofThailandandtheOfficeofIndustrialEco-nomicsreportedanimprovedbusinessoutlook,withforecastedindustrialGDPgrowthfor2013at4-5%.
Source:BankofThailandandOfficeofIndustrialEconomics
Remarks:
1/BusinessSentimentIndexiscompiledfromBOTsurveydataof1,010businesses.
2/Belowistheinterpretationoftheindex:
Index=50indicatesthatbusinesssentimentremainsstable.
Index>50indicatesthatbusinesssentimenthasimproved.
Index<50indicatesthatbusinesssentimenthasworsened.
3/ProductionIndexisvalueaddedweightandseasonallyadjusted.
Figure1
Demand Indicators
TheOfficeofIndustrialEconomicssaid,“the manufacturing production index (MPI) will be 3.5-4.5 percent higher and the volume of industrial exports will reach Bt6.2 trillion. The 4-5 per cent industrial GDP growth is based on an average exchange rate of Bt31 against the US dollar.”
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FDIisthelifebloodofdemandforThaiindustrialrealestate,asforeignfirmsaccountfortheover-whelmingmajorityofoccupiersinThailand’sindustrialestatesandparks.Intheirlatestreport,Thailand’sBoardofInvestment(BOI)showedasubstantialincreaseinthevalueandnumberofapprovedinvestmentprojectsin2012.
Figure3
Foreign Direct Investment in Thailand
Foreign Direct Investment
Figure2
Value of Approved Investment Projects
Source:TheBoardofInvestment
Pastinvestmentinflowshadfallengreatlysincethe2008peakbeforetheGlobalFinancialCrisis(GFC)hitinQ42008,andonlyslowlybegantorecoveragainin2010.However,whilstthevalueoftheBOI’sapprovedprojectsduringthefloodsof2011remainedconstant,theactualFDIfiguresforQ32011showedasignificantdropbeforebouncingbackinQ42011.
2012thenisastoryofrecoveryasFDIflowsincreasedthroughouttheyear,butitwasparticularlyevidentinQuarter3whichsawinwardFDIflowsreachalmost212billionbaht,afigurethathasnotbeenseensincebeforetheGFC.
Thehighestgrowthinforeigninvestmentwasseenintheelectricandelectronicproductsectors,whichincreasedby266.13%or3-4timesto100billionbaht,comparedtoonly27.4billionbahtinsameperiodlastyear.
Source:TheBoardofInvestment
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Figure4
Value of Foreign Investment Projects Approved by Sector, 2011-2012
Source:TheBoardofInvestment
Figure5
Source:TheBoardofInvestment
Almost65%ofallinboundFDIinQ3,orsome143billionbaht,originatedinJapan,underscoringthecontinuedstrengthandimportanceoftheJapanese-Thairelationship,especiallyinthewakeofstrainedrelationsbetweenChinaandJapan.
Q4 2012Manufacturing Property Market
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Averageoccupancyratesofthewarehouserentalmarketdroppedfromthelastquarterby0.31%to93.13%,duetonewdevelopmentcompletions.However,inQ42012,thetotalamountofspaceoccupiedincreasedby141,462sq.m.,indicatingpositivenetabsorptionamidstrobustdemandforwarehousingspace,particularlyinSamutPrakarnandalongtheEasternSeaboard.
Serviced Industrial Land Plot
ThetotalsupplyofSILPsinQ42012reached125,325Rai,representinganincreaseof2.07%Y-o-Y.5,288Raiofindustriallandwassoldoverthecourseof2012,anincreaseof1,104Raifrom2011,or26%.
Figure6
Serviced Industrial Land Plot (SILP)
Source:KnightFrankThailandResearch,andIndustrialEstateAuthorityofThailand
Figure7
Net Absorption
Source:KnightFrankThailandResearch,andIndustrialEstateAuthorityofThailand
However,therehasbeenpositiveabsorptionseeninthemarketforthepast8consecutivequar-ters,reflectingstrongdemandresultingfromincreasedFDIflows.
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Q4 2012Manufacturing Property Market
Figure8
SILP Asking Price Range
Source:KnightFrankThailandResearch,andIndustrialEstateAuthorityofThailand,asofDecember,2012
*IndustrialestatesinRayongmayalsoqualifyforBOIZone3privileges
IndustriallandpricesthroughoutThailandrangefrom1millionbahtperRai(625baht/sqm)toover16millionbahtperRai(10,000bahtpersqm).During2012,pricesacrossthecountryincreasedbyaround5%onaverage.However,itwastheservicedindustriallandintheprovincesthatdidnotfloodthatexperiencedthegreatestgrowth.PricesontheEasternSeaboardandtheareawedescribeastheCentralEasternZone,thatincorporatestheprovincesofPrachinburiandsomeofChachoengsao,increasedby6.34-6.43%,respectively.SomemajordevelopersontheEasternSeaboardwereevenabletoincreasepricesby15-20%inresponsetoincreaseddemand.
Table1
Source:KnightFrankThailandResearch
(Million THB / Rai)
Industrial Land Prices by Zone 2011 2012 % Change
Suvarnaphumi-Bangpakong 7.54 8 6.16%
NorthernZone 3.31 3.28 -0.67%
CentralEasternZone 2.21 2.35 6.43%
WesternZone 2.83 2.83 0.00%
EasternSeaboardZone 3.78 4.02 6.34%
Bycontrast,askingpricesinestatestotheNorthofBangkokfell,whilstpricesintheWesternindustrialestatesremainedstable.
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Factory Rental Market
Figure9
Factory for Rent Market
Source:KnightFrankThailandResearch
Thetotalsupplyofreadybuiltfactoriesincreased17.82%in2012to2,654,537sqm,increasing3.72%inthefinalquarterasdevelopersrespondedtoincreaseddemand
Figure10
Net Absorption
Source:KnightFrankThailandResearch
Thefactoryrentalmarket’soccupancyratestoodat89.76%inQ42012,whichincreasedfrom88.99%inthepreviousquarter,despitenewproductbeingaddedtothemarket.Thepositivenetabsorptionhasbeenconstantoverthelast6quarters,showingthecontinuousgrowthindemandforfactoryspace,eveninthewakeofthefloods.
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Q4 2012Manufacturing Property Market
Factory Rents in the Four Key Industrial Locations
Table2
Source:KnightFrankThailandResearch
Remarks:
Prime=thetop10%ofreadybuiltfactoriesthatcommandhighestrentsintheirsector.
Rental Rate (THB/Sq.m./Month)
Factory Rental Market Rama 2 - Samut Sakhon
Pathum Thani - Ayutthaya
Suvarnabhumi - Bangpakong
Eastern Seaboard
Prime 181 217 218 210
Non-prime 133 128 111 165
AverageAllGrades 140 142 149 183
outlook ForeignDirectInvestmentislikelytocontinuetoflowintoThailandin2013,andweexpectthatthelocationsthatenjoythebestlabouravailabilitywithgoodlogisticsinfrastructuretocontinuetobethemostpreferred,especiallyiftheydidnotfloodin2011.
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Appendix: Factory Rental Market : purposebuiltfactoriesforrentfromallmajordevelopers,butnotlimitedtoindustrialestatelocations.
SILP : servicedindustriallandparcelslocatedinindustrialestates,zonesandparks.
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© Knight Frank LLP 2013
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