q4 2012Manufacturing Property Market
research
• DemandoftheindustriallandsinEasternSeaboardhasbeenevidentlyincreasingsinceflood2011.
• ForeignDirectInvestmentislikelytocontinuetoflowintoThailandin2013.
• Locationsthatenjoythebestlabouravailabilityandlogisticsinfrastructurewillcontinuetobethemostpreferredareas,especiallyiftheydidnotfloodin2011.
highlights
2
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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3
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
4
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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5
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.
6
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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7
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.
8
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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9
Appendix: Factory Rental Market : purposebuiltfactoriesforrentfromallmajordevelopers,butnotlimitedtoindustrialestatelocations.
SILP : servicedindustriallandparcelslocatedinindustrialestates,zonesandparks.
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© Knight Frank LLP 2013
This report is published for general information only. Although high standards have been used in thepreparation of the information, analysis, views and projections presented in this report, no legal responsibilitycan be accepted by Knight Frank Research or Knight Frank LLP for any loss or damage resultant from thecontents of this document. As a general report, this material does not necessarily represent the view ofKnight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in partis allowed with proper reference to Knight Frank Research.
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