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• Industriallandsalesdroppedto2,276rai,thelowestinthepastfewyears.Therewereonly937raiinH12014and1,339inH22014duetopoliticalunrest.• Factoryoccupancyratesstoodfirmat77.6%inH22014,areductionof0.1%yearonyear.• ThehighestfactoryrentalrategrowthwasseenintheEasternSeaboardwithanincreaseof5.6%,however,therentalratesinPathumthani–Ayutthaya,andSuvarnabhumi–Bangpakongremainedstable.
highlights
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Economic Overview
Source: Office of the National Economic and Social Development Board
In2014,theThaiindustrialsector’stotalvaluewasapproximatelyTHB3.95trillion,approxi-matelyone-thirdofThailand’stotaloutput.Similarlytothepreviousyears,itisexpectedthatthegrowthoftheindustrialsectorcouldoutperformThailand’soverallgrowthrate.From2000to2014,theaveragegrowthrateintheindustrialsectorwas4.3%perannum,whereastheaveragegrowthrateoftheThaieconomywasat3.9%perannum.Basedonthisinformation,itcanbeconcludedthattheindustrialsectorisakeydriveroftheThaieconomy,bothintermsofgrowthandvalue.Inaddition,thesector’sgrowthcouldalsobeattributedtotheriseindemandforrealestate;morespecifically,inthefactoryandwarehousingmarkets.
Figure1Growth Rates of the Thai Industrial Sector and Thai National Output from 2000 to 2014
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Source: Board of Investment, ThailandDuringthefirsthalfof2014,theBoardofInvestment(BOI)wasunabletoformallyapprovethepromotionsofalargenumberofmajorprojectsasitwashandicappedbythepoliticalturmoil.However,in2014,Thailandsawanoverallincreaseof1%inthetotalvalueofBOI-approvedforeigndirectinvestment,mostofwhichwereapprovedinthelastquarteroftheyearaheadoftheannouncedchangestotheinvestmentpromotionpolicy.
Seven-Year Investment Promotion Strategy (2015 - 2021) InJanuary2015,Thailandenactedsomeradicalchangestotheirinvestmentincentivepolicy.ThepreviouspolicywasdesignedtoincentiviseinvestmenttolocationsfurtherawayfromBangkok;awardingmoretaxincentivesthefurtherawaytheprojectwaslocatedfromthecapi-tal,withlittleregardtothetypeofbusinessactivitythatwasbeingundertaken.
InthenewpolicyBOIZoneshavebeenabolished.Ithasbeendesignedtoencourageandfosterpreferredbusinessactivities.Thenewschemeawardsincentivesbasedonthetypeofbusinessactivity,andofferhighprioritygroupsadditionalmeritbasedincentives.Major Points of Investment Promotion Policy
1. Promoteinvestmentthathelpenhancenationalcompetitiveness2. Promoteenvironment-friendlyactivities3. Promoteclustersinaccordancewithregionalpotentialandstrengthenedvaluechain4. Promoteinvestmentinsouthernborderprovinces5. Promotespecialeconomiczone,especiallyinborderareas6. PromoteThaioverseasinvestment
foreign direct investment in thailand
Figure2
BOI-approved Foreign Direct Investment in the Industrial Sector from 2008 to 2014
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Granting Investment Incentives•Activity-basedIncentives-Incentivesbasedontheimportanceofactivities•Merit-basedIncentives-Grantadditionalincentivestoencouragemoreinvestment/expendituresthatbenefitthecountryoroverallindustry.oCompetitivenessEnhancementoDecentralizationoIndustrialAreaDevelopment
Activity-based Incentives •A1-Knowledge-basedactivities,focusingonR&Danddesigntoenhancethecountry’scompetitiveness•A2-Activitiesininfrastructureforthecountry’sdevelopment,activitiesusingadvancedtechnologytocreatevalueadded,withnoneorveryfewexistinginvestmentsinThailand•A3-Hightechnologyactivitieswhichareimportanttothecountry’sdevelopment,withafewinvestmentsalreadyexistinginThailand•A4-ActivitieswithlowertechnologythanA1-A3butaddvaluetodomesticresourcesandstrengthensupplychain•B1/B2-SupportingindustriesthatdonotusehightechnologybutarestillimportanttovaluechainListofActivitiesEligibleforInvestmentPromotioncanbefoundatAnnouncementoftheBoardofInvestmentNo.2/2557PoliciesandCriteriaforInvestmentPromotion.
H2 2014Manufacturing Property Report
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Merit-based Incentives •MeritonCompetitivenessEnhancementAdditionalCITincentiveswillbegranteddependingoninvestment/expenditureratio(%)
•MeritonDecentralizationProjectslocatedin20provinceswithlowestpercapitaincomeo3additionalyearsofcorporateincometaxexemptionoActivitiesinGroupA1andA2receiveanadditional50%CITreductionfor5yearsaftertheendofCITexemptionperiodoDoubledeductionsfromthecostsoftransportation,electricityandwatersupplyfor10yearsoAdditional25%deductionofthecostofinstallationorconstructionoffacilities20provinces:Kalasin,Chaiyaphum,NakhonPhanom,Nan,BuengKan,BuriRam,Phrae,MahaSarakham,Mukdahan,MaeHongSon,Yasothon,RoiEt,SiSaKet,SakhonNakhon,SaKaew,Sukhothai,Surin,NongBuaLamphu,UbonRatchataniandAmnatcharoen[ExcludingborderprovincesinSouthernThailandandSpecialEconomicDevelopmentZoneswhichhaveseparatespecialincentivepackages]•MeritonIndustrialAreaDevelopmentProjectslocatedinindustrialestatesorpromotedindustrialzones
1additionalyearofcorporateincometaxexemption
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Serviced In-dustrial Land Plot
Source: Knight Frank Thailand Research
Attheendof2014,thetotalsupplyofServicedIndustrialLandPlot(SILP)wasat140,841rai,increasingby3.1%fromthepreviousyear.Onaverage,theSILPsupplyhasincreasedbyasteady2to5%eachyear.
Figure3
Supply
Other Special Policies •MeasurestoEnhanceCapabilitiesofSmallandMediumEnterprises(SMEs)•InvestmentPromotionPolicyforIndustrialDevelopmentinBorderProvincesinSouthernThailandFocusonpromotinginvestmentin4borderprovincesinSouthernThailand(Narathiwat,Pattani,YalaandSatun)and4districtsinSongkhla(Jana,NaThawee,SabaYoi,Dhepha)•InvestmentPromotionPolicyforInvestmentinSpecialEconomicZones•Takprovince14sub-districtswithborderareasinMaeSot,PobPra,andMaeRamaddistricts•Mukdahanprovince11sub-districtswithborderareasinMuang,Wanyai,andDontarndistricts•SaKaewprovince4sub-districtswithborderareasinAranyaprathet,andWattananakorndistricts•Songklahprovince4sub-districtsinSadaodistrict•Tratprovince3sub-districtsinKlongyaidistrictDetailedinformationcanbefoundattheBoardofInvestmentwebsite,www.boi.go.thorAnnouncementoftheBoardofInvestmentNo.2/2557PoliciesandCriteriaforInvestmentPromotionwhichcanbefoundherehttp://www.boi.go.th/upload/content/newpolicy-announcement%20as%20of%2020_12_57_33650.pdf
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Source: Industrial Estate Authority of Thailand
Source:KnightFrankThailandResearchMorethan140,000raiofindustriallandareunderdevelopment,andmostofthefuturesup-plyisintheEasternSeaboardZone,whichbenefitsfromitsproximitytoLaemChabangportandaflood-freelocation.Withinthisyear,nearly4,000raiareexpectedtobeready.
Figure4
Table1
Future Supply
Use of Industrial Estate Land Area in 2014 Classified by Industry
ThailandproducesmorecarsthananyotherASEANnation.Itisamongstthe10largestcarproducersintheworld,thankstopoliciesthatnurtureandsupportthelocalautomotiveindustry.Currently,Thailandcommandsupto55%ofASEAN’stotalcarproduction.Asoneofthecountry’smostimportanteconomicdrivers,theautomotiveindustryiscurrentlyoccupy-
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Table2
industrial land price
Source: Knight Frank Thailand Research
Source:KnightFrankThailandResearch
In2014,industriallandsaleswere2,276rai,thelowestlevelinthepastfewyears.Therewereonly937raiinH12014and1,339inH22014,duetodelaysinBOIinvestmentapprovals,duetotheabsenceoftherelevantcommitteesincelate2013tomid-2014.Aftermid-2014,thelandsalesvolumewasexpectedtorecovery;however,foreigninvestmentsentimentwasstillnot
improving.
Source:KnightFrankThailandResearch
Demand
Figure6
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In2014,theoverallSILPaskingpriceincreasedby0.9%fromlastyear,to4.3%.IndustriallandintheeveryZoneenjoyedpricinggrowth.SILPpricesontheCentralEasternZonerecordedthehighestgrowth,whichsawaveragepricesincreaseby4.3%.Pricinggrowthin2014wasnotasmuchasthegrowthin2013,duetopoliticalunrestthataffectedindustriallandde-mandasindicatedinthedropoftheindustriallandsalesvolume.Location,proximitytotheport,logisticsfacilitiesandinfrastructure,laboursourcesandfloodriskarethekeyfactorsthataffectindustriallandprices.
Thetotalsupplyofrentalfactoryspaceattheendof2014was2,553,046squaremeters,increasingfromlastyear’ssupplyby88,577squaremetres,representingagrowthof3.6%.Asignificantincreaseinthesupplywasobservedrightafterthemajorfloodsof2011inThailand,wherefactoriesweredevelopedtoaccommodatenewdemandinareasunaffectedbyflooding.
Therentalfactorysupplydidnotincreaseaggressivelyintermsofwarehousesupply,duetothelimitationoflanduseregulationsrequiringalicenseforfactoryoperations.
Source: Knight Frank Thailand Research
Factory rental Market
Figure7
Supply
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Future Supply
Source: Knight Frank Thailand Research
Basedonannouncementsfrommajorindustrialdevelopers,itisexpectedthattherewillbeatotaladditionalspaceof150,000squaremetresinSamutprakarn,Chonburi,RayongandPrachinburiin2015.
Chonburiprovincehasthelargestshareofthetotalrentalfactorysupplyat30%,withatotalrentalfactoryspaceof775,636squaremetres.Samutprakarnhasthesecondlargestshareat20%,with517,452squaremetres.ThethirdandthefourthlargestsharesgotoRayongat19%,andAyutthayaat17%.TheEasternSeaboardinChonburiandSamutprakarnprovincesboaststhelargestsupplyoffactoryleasablespace,asthoseareasaremajorlocationsofvariousindustrialhubsandmoreparticularly,theyarehometoThailand’sautomotiveindustry.
Figure8Supply by Provinces
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Demand
Thecurrentoccupancyrateis77.6%,areductionof0.1%comparedtotherateattheendof2013.Thiswasmostlyduetoanincreaseintherentalfactorysupplyin2014.Thetotaldemandforrentalfactoryspaceattheendof2014was1,980,108squaremeters,anincreaseof64,693squaremetersfromthepreviousyear.
TheoccupancyrateintheSuvarnabhumi–BangpakongandtheEasternSeaboardcontinuestoperformbetter,withtheoccupancyratesof93.6%and81.3%,respec-tively.Thisismostlyduetohigherdemandswithinthearea,whichislocatedwithinthecloseproximityofmanyindustrialestates,LaemChabangdeepseaportandSuvarnabhumiInternationalAirport.Suvarnabhumi–BangpakonghasahighlevelofoccupancyasthesupplyinthisareaislimitedandtheavailablelandtodeveloprentalfactoriesislessthanthatoftheEasternSeaboard.TheoccupancyratesinPathumthaniandAyutthayaarestilllowerthanthemarketaverageat60.8%;however,recentdatashowssignsofrecovery.
Figure9
Figure10
Source:KnightFrankThailandResearch
Source:KnightFrankThailandResearch
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Theaveragefactoryrentalratewas205.4THB/sq.m./month,increasingby2.7%Y-o-Y.TheEasternSeaboardZonecommandedthehighestrentsof224.8THB/sq.m./month,followedby200.7THB/sq.m./monthinPathumthani–Ayutthaya,and174.6THB/sq.m./monthinSuvarnab-humi–Bangpakong.
ThehighestrentalrategrowthwasseenintheEasternSeaboardwithanincreaseof5.6%;however,therentalratesinPathumthani–Ayutthaya,andSuvarnabhumi–Bangpakongremainedstable.
Suvarnabhumi–Bangpakonggenerallyhaslowerfactoryrentalrates,asmostoftherentalfactoryspaceisnotlocatedinsideindustrialestates;moreover,landinsidetheindustriales-tatesinthisareaisquitescarce.
Figure11
Rental Rate
Source: Knight Frank Thailand Research
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TheaskingrentalrateisthehighestinChonburiandChachoengsaoprovincesatTHB250persquaremetrepermonth.ThesecondhighestisinSamutprakarnandRayong,wherethefeeisatTHB230persquaremetrepermonth.ThehighestrateinAyutthayaisatTHB220persquaremetrepermonth.Provincesunaffectedbythefloods,suchasChonburi,Chachoengsao,SamutprakarnandRayong,com-mandthehighestrents.
In2014,Thailand’sindustrialpropertymarketwasweakenedasaresultofthenegativedomesticcircumstances.However,Thailandisstillattractivetoinvestors,withadvantagesofahighlevelofinfrastructure,geographiclocationinthemiddleofSoutheastAsia,specialtaxincentives,andaskilledlabourforce.Moreover,thelaunchoftheAECisexpectedtobringpositivechangestoThailand.Weexpectgrowthindemandfrombothdomesticandinternationalcompanies,includingsmall,medium-sized,andlargeenterprises,reflectingtheneedforindustrialpropertyandthegrowthintheautomotiveindustryfromEcoCarPhase2,whichstrengthensThailand’spositionasthekeyautomotivemanufacturingbaseinASEAN.WealsoexpecttoseeindustriallandvaluesincreaseintheEasternSeaboardandSamutprakarn,astheselocationshavelimitedsupply.
OUTLOOK
Figure12
Rental Rate by Provinces
Source: Knight Frank Thailand Research
FactoryRentalMarket:purposebuiltfactoriesforrentfromallmajordevelopers,butnotlim-itedtoindustrialestatelocations
SILP:servicedindustriallandparcelslocatedinindustrialestates,zonesandparks
APPENDIX
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Knight Frank Research provides strategic advice, consultancy services and forecastingto a wide range of clients worldwide including developers, investors, fundingorganisations, corporate institutions and the public sector. All our clients recognisethe need for expert independent advice customised to their specific needs.
Knight Frank Research Reports are also available at www.knightfrank.com
© Knight Frank LLP 2015
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 responsibility can be accepted by Knight Frank Research or Knight Frank LLP for any loss or damage resul-tant from 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 allowed with proper reference to Knight Frank Research.
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.
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