COMMERCIAL RESEARCH Manufacturing Property Market H2 2015
Highlights Industrial land sales increased to 3,549 rai, reflecting a recovery from the previous year and an increase of 1,273 rai or by 55.9. Economic Overview FIGURE 1 Ready built factory occupancy rate was at 73.0 at the end of 2015, a reduction of 0.5 due to the slowdown in the export and manufacturing sector. On average, the ready built factory rental rate increased by 1.4 to 206.9 baht per square metre per month. Only the rate in the Pathumthai Ayutthaya area showed no growth. Marcus Burtenshaw Head of Commercial Agency We expect to see continued growth in 2016 specifically from new investment in the electronics, auto parts, food and renewable energy sectors, and whilst Japanese investment remains subdued we are starting to see increased activity from European and increasingly, Chinese firms. 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source : Office of the National Economic and Social Development Board At the end of 2015, the total value of Thailand s manufacturing sector was approximately 4.8 billion baht, or 36 of the total GDP. In addition, this year s manufacturing sector grew by 0.9, compared to -0.2 in 2014. This shows an improvement of performance in the sector. Over the past 15 years, from 2001 to 2015, the trend of the yearly performance of the manufacturing sector has surpassed the total GDP; the manufacturing sector outperforms the total GDP in terms of the average growth rate per year, at 4.1 and 3.9, respectively. This emphasises that the manufacturing sector is very influential to the Thai economy and its growth. Furthermore, growth in the manufacturing sector indicates changes in demand for properties, particularly factories and warehouses. FIGURE 2 Mil Baht 142,077 FDI (Volume of Appoval) 94.8 279,233-0.3 278,447 Growth 97.1 BOI-approved Foreign Direct Investment In 2015 the number of projects approved by the Board of Investment amounted to 493,690 million baht, an increase of 10,179 million baht or by 2.1 from last year. The amount of FDI depends on global and domestic affairs, such as the economic and political situation, natural disasters, and economic policies. In the past 2 to 3 years, Thailand had experienced both natural disaster and political uncertainty, which deterred foreign investments. However, 2015 saw relief from the political tension and commitment made by the Thai government to expand the country s infrastructure network, which helped to boost investors confidence. 2009 2010 548,954-12.8 478,927 483,511 1.0 2.1 493,690 Source : Board of Investment, Thailand 2
Manufacturing PROPERTY MARKET H2 2015 COMMERCIAL Research SILP Supply At the end of 2015, the total supply of Serviced Industrial Land Plot (SILP) was 151,194 rai, increasing by 4,033 rai or 2.7 from the previous year. On average, since 2011, the SILP supply has been constantly increasing by 2 to 8 yearly, which comprise both new and expansion of existing industrial estates. FIGURE 3 Existing Supply New Supply Rai 126,940 3,891 126,940 5,840 130,831 10,490 136,671 4,033 147,161 Source : Industrial Estate Authority of Thailand and Knight Frank Thailand Research Future Supply TABLE 1 Industrial Estate Province Area Size (Rais) Complete Year Bangpoo Industrial Estate 2 samut Prakarn 800 2016 Baan Bueng Pattana Industrial Estate chonburi 1,739 2016 Pinthong Industrial Estate (Project 4) chonburi 653 2016 Yamamoto Industries I.E. chonburi 700 2016 Rojana Bowin Chonburi Industrial Park chonburi 1,000 2016 Rojana Laem Chabang Industrial Park chonburi 1,600 2017 Amata City Industrial Estate (Expansion) rayong 1,800 2016 Hemaraj Eastern Seaboard I.E. (3rd Location) Rayong 2,100 2017 Source : Industrial Estate Authority of Thailand and Knight Frank Thailand Research Demand Industrial land sales increased to 3,549 rai, reflecting recovery from the previous year, and an increase of 1,273 rai or by 55.9. This year s drastic rise was due to a fall of sales in 2014, which was affected by domestic political tension. During the end of 2013 until mid 2014, the Board of Investment of Thailand was not able to authorise any projects that required large capital, which affected the volume of transactions for industrial land in that year. In addition, foreign investors were being increasing cautious due to the political uncertainty. FIGURE 4 Sales Volume Rai 5,954 9,542 8,327 2,276 3,549 Source: Knight Frank Thailand Research 3
Industrial Land Asking Price by Zone TABLE 2 Industrial Land Price by Zone (Million THB / Rai) change 2014 2015 Bangkok - Samut Prakarn - Bangprakong 8.45 9.30 10.08 10.44 10.71 3.6 2.6 Eastern Seaboard Zone 3.76 4.03 4.66 4.71 4.86 1.1 3.3 Northern Zone 3.75 3.63 3.78 3.82 3.98 0.9 4.4 Central Eastern Zone 2.26 2.49 2.68 2.77 2.78 3.3 0.3 Western Zone 2.83 2.83 2.86 3.03 3.03 5.7 0.0 Industrial estates in Bangkok - Samut Prakarn Bangprakong boast the highest average selling price at 10.71 million baht per rai. This is followed by industrial estates in the Eastern Seaboard Zone at 4.86 million baht per rai, and those in the Northern Zone (Pathumthani-Ayutthaya) at 3.98 million baht per rai. On average, the industrial land price increased between 0 and 4.4 from last year. The Northern Zone (Pathumthani- Ayutthaya) region recorded the highest growth in 2015 of around 4.4, followed by the Eastern Seaboard zone with growth of 3.3. From 2012 to 2013, industrial land in Suvarnabhumi- Bangpakong and the Eastern Seaboard region increased by 10 since it was unaffected by the flood; it also became highly sought after by manufacturers and developers. And some industrial estates had increased their asking prices by up to 25. FIGURE 5 Million THB / Rai 8.45 9.30 10.08 10.44 10.71 Bangkok Samut Prakarn Bangprakong Industrial Land Asking Price by Zone 2011 3.75 3.63 3.78 3.82 3.98 Northern Zone 2012 2013 2014 2015 2.26 2.49 2.68 2.77 2.78 Central Eastern Zone 2.83 2.83 2.86 3.03 3.03 Western Zone 3.76 4.03 4.66 4.71 4.86 Eastern Seaboard Zone Ready Built Factory Market Supply The total supply of ready-built factories as of 2015 was recorded at 2,745,232 square metres, an increase of 6.4 from 2,580,036 square metres at the end of 2014. During 2012 to 2013, the supply increased massively in locations that were not affected by the 2011 floods, such as the Eastern Seaboard and Suvarnabhumi- Bangpakong. FIGURE 6 Existing Supply New Supply 295,566 207,330 92,567 165,196 sq.m. 1,984,572 1,984,572 2,280,138 2,487,469 2,580,036 4
Manufacturing PROPERTY MARKET H2 2015 COMMERCIAL Research Chonburi includes the largest share of ready built factories at 30 by square metres because it is home to many large-scale industrial estates. It is a key production hub for Thailand s massive automotive industry. Samutprakarn has the second largest share at 21 thanks to its convenient location at a halfpoint between Laemchabang Port and Bangkok. The Eastern Seaboard commands the largest supply share in the rental factory market due to its proximity to Laemchabang Port and a number of industrial estates. It consists of two provinces in the Eastern part of Thailand: Chonburi and Rayong. FIGURE 7 Rayong / 490,671 / 18 Ayutthaya / 424,415 / 15 Pathum thani / 158,368 / 6 Saraburi / 115,646 / 4 Prachinburi / 64,106 / 2 Chachoengsao / 40,740 / 2 Nontaburi / 22,500 / 1 Chonburi / 831,159 / 30 Sumutprakarn / 597,627 / 22 Future Supply TABLE 3 Project Developer Province Total Space Completion Thailert SME Factory thailert SME Factory Samut Prakarn 9,000 2016 Thriven Km.19 thriven Group samut Prakarn 20,000 2016 Amata Summit - Amata Nakorn I.E. Amata Summit chonburi na 2016 Ticon - Rojana Prachinburi ticon Prachinburi na 2016 Hemaraj Ready Built Factory Hemaraj chonburi-rayong na na Occupancy Rate FIGURE 8 The ready built factory occupancy rate was 73.0 as of the end of 2015, a drop of 4.2 compared to the rate in 2014. This was mostly due to an increase in the rental factory supply since 2012 whilst demand growth has been consistently and relatively weaker. The total demand for rental factory space at the end of 2015 was 2,002,988 square metres, an increase of almost 10,890 square metres from the previous year. 1,984,572 90.8 1,802,051 2,280,138 Supply Demand Occupancy 82.1 1,571,634 2,487,469 77.8 1,935,620 sq.m. 2,580,036 77.2 1,992,098 2,745,232 73.0 2,002,988 5
Net absorption is the change in the amount of occupied space; in 2015, net absorption stayed positive at 10,890 square metres. In 2012 shortly after the 2011 floods, many RBF tenants chose to relocate their manufacturing operations to low flood risk areas, such as the Eastern Seaboard where rental rates were not so different to previous locations. Hence the massive negative take-up rate in the Pathumthani-Ayutthaya region and positive take-up in the Eastern Seaboard. Since then, flood risk has become one of the major criteria in the selection of manufacturing sites, especially for multinational firms. FIGURE 9 Net Absorption sq.m. 69,582 63,986 2012 2013 2014 2015 56,478 10,890 Occupancy Rate by Locations FIGURE 10 Market Suvarnabhumi - Bangpakong Eastern Seaboard Pathum thani - Ayutthaya In 2015, the Suvarnabhumi Bangpakong zone, encompassing Bangpakong, Samut Prakarn, Eastern Bangkok and Chachengsao, enjoyed the highest occupancy rate of 90.3, followed by the Eastern Seaboard at 73.9. 100.0 90.0 80.0 70.0 60.0 50.0 40.0 97.6 90.8 90.8 84.6 98.2 98.5 88.6 81.8 82.1 77.8 56.0 53.8 93.6 80.4 77.2 61.0 90.3 73.9 73.0 60.7 The occupancy rates of rental factories were lowest at 60.7 in Pathumthani and Ayutthaya. 30.0 20.0 10.0 Asking Rental Rate 0.0 On average, the ready built factory rental rate increased by 1.4 to 206.9 baht per square metre per month. Only the rate in Pathumthai Ayutthaya did not grow; in fact, the trend was to stay the same due to the lowest occupancy rate. The Eastern Seaboard commanded the highest rental rate of 227.3 baht per square metre per month owing to the fact that most of the factories are located inside industrial estates, where factories can get more incentive from IEAT. FIGURE 11 Market Suvarnabhumi - Bangpakong Eastern Seaboard Pathum thani - Ayutthaya 240.0 230.0 227.3 220.0 210.0 222.3 211.5 212.8 207.4 202.0 202.6 204.1 206.9 200.0 201.3 199.9 199.6 200.6 200.0 195.3 190.0 180.0 180.4 170.0 174.8 169.3 173.7 174.6 160.0 6
GLOBAL BRIEFING For the latest news, views and analysis on the world of prime property, visit KnightFrankblog.com/global-briefing FIGURE 12 THB / sq.m. / month 260 240 220 200 180 160 140 120 100 Asking Rental Rate by Provinces The asking rental rate was the highest in Chonburi and Chachoengsao provinces at 250 baht per square metre per month. The second highest was in Samutprakarn and Rayong, at 230 baht per square metre per month. The highest rate in Ayutthaya was at 220 baht per square metre per month. Provinces unaffected by the floods, such as Chonburi, Chachoengsao, Samutprakarn and Rayong, commanded the highest rents. Outlook Recent market-leading research publications H2 2015 Logistics Property Market 210-250 230-250 125-240 210-230 140-220 160-210 Chonburi Chachoengsao Samutprakarn We expect to see a slow recovery in industrial land sales and demand in factory space, given the state of the economy; recent data has shown some Q4 2015 Bangkok Office Market Overview Q4 2015 Bangkok Condo Market Overview Knight Frank Research, Reports are available at KnightFrank.co.th/Research Rayong COMMERCIAL RESEARCH Logistics ProPerty Market H2 2015 COMMERCIAL REsEARCh Bangkok office Market overview Q4 2015 Ayutthaya Pathumthani Saraburi Prachinburi Nontaburi positive signs of improvement. Thanks to efficient infrastructure in Thailand, including transportation and public utilities, Thailand remains the prime destination for foreign investors due to its central geographical location in the region, affording good connectivity to Cambodia, Laos, Myanmar, and Malaysia. However, there are risks, which investors need to take into a consideration, such as political uncertainty, which had a huge impact on the market as witnessed in 2014. Also the global economic climate can influence the decision of foreign investors. Thailand remains an attractive investment destination, characterized by a high level of infrastructure, favourable geography, capable labour force, and a solid financial system. The BOI s new incentives policy has been enforced in 2015. This is expected to yield encouraging results, as the government aims to facilitate industrial growth even further. RESIDENTIAL RESEARCH Bangkok ConDo Market overview Q4 2015 175-185 180-185 RESIDENTIAL RESEARCH 120-130 Super prime and prime Condominium market overview 2H 2015 2H 2015 Super prime and prime Condominium market overview Thailand Contacts Phanom Kanjanathiemthao Managing Director +66 (0)2643 8223 Ext 124 phanom.kanjanathiemthao@th.knightfrank.com Chaturawit Wattanapruk Executive Director +66 (0)2643 8223 Ext 120 chaturawit.wattanapruk@th.knightfrank.com Surasak Limpa-Arayakul Head of Valuation and Advisory +66 (0)2643 8223 Ext 143 surasak.limpa-arayakul@th.knightfrank.com Roong Sitthisankunchorn Head of Property Management +66 (0)2643 8223 Ext 144 roong.sitthisankunchorn@th.knightfrank.com Marcus Burtenshaw Head of Commercial Agency +66 (0)2643 8223 Ext 121 marcus.burtenshaw@th.knightfrank.com Frank Khan Head of Residential +66 (0)2643 8223 Ext 280 frank.khan@th.knightfrank.com Risinee Sarikaputra Director, Research and Consultancy +66 (0)2643 8223 Ext 180 risinee.sarikaputra@th.knightfrank.com Phuket Contact Nattha Kahapana Knight Frank Phuket +66 (0)7631 8151 Ext 300 nattha.kahapana@th.knightfrank.com Important Notice Knight Frank LLP 2016 This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members names. 7