q1 2013Manufacturing Property report
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• IndicatorsofconfidencestarttoreturntoAyutthayaandPathumthaniastransactions,occupanciesandpricesincrease
• ThetotalsupplyofServicedIndustrialLandPlots(SILPs)inQ12013reached120,425Rai,demonstratinganincreaseof6.07%YoY
• Thefactoryrentalmarket’soccupancyratestoodat86.82%inQ12013,aslightdecreasefrom87.62%inthepreviousquarter,asnewsupplyenteredthemarket.
• NewInvestmentIncentivesannounced
highlights
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Q1 2013Manufacturing Property report
Economic Overview
TheBankofThailandandtheOfficeoftheNationalEconomicandSocialDevelopmentBoard(NESDB)forecastedGDPgrowthfor2013between4.5%to5.5%.
Source:BankofThailandandOfficeofIndustrialEconomics
Remarks:
1/BusinessSentimentIndexiscompiledfromBOTsurveydataof1,010businesses.
2/Belowistheinterpretationoftheindex:
Index=50indicatesthatbusinesssentimentremainsstable.
Index>50indicatesthatbusinesssentimenthasimproved.
Index<50indicatesthatbusinesssentimenthasworsened.
3/ProductionIndexisvalueaddedweightandseasonallyadjusted.
Figure1Demand Indicators
TheOfficeofIndustrialEconomicssaidthelatestresultsshowthattheManufacturingProductionIndex(MPI)overthefirsthalfof2013decreasedfromlastyearastheexport-orientedindustriesencountereddifficultieswiththeglobaleconomicclimateandappreciationofthebaht.
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Figure3Value of Foreign Investment Projects Approved by Sectors
ForeignDirect Investment in Thailand
Figure2Foreign Investment
Source:BoardofInvestment
ForeigninvestmentisthemajorsourceofThaiindustrialpropertydemand.During2012,foreigninvestmentgrewsubstantiallyafterthefloods,withespeciallystrongcommitmentfromJapaneseinvestorswhoaccountedfor63%,orover348billionbhat,ofallFDIin2012.
Majorinvestmentsannouncedinthefirstsixmonthsof2013includeHondainRojanaIndustrialpark,Prachinburi,ToyotainGatewayCity,BridgestoneinAmataNakorn,Chonburi,andElectroluxinHemerajRayongIndustrialLand,tonamejustafew.
Withstronginterestintheautomotive,metalprocessingandelectricalapplianceandelectron-icsindustriesfromJapaneseinvestors,itisthe“metalproductsandmachinery”,and“electricandelectronicproducts”sectorsthatrecordedthehighestgrowthin2012.
FromJanuarytoApril2013,thelevelofFDIsrosetocloseormorethan2011’slevelforsomesectorsandregisteredalmost35%of2012’slevelacrossallsectors.
Source:TheBoardofInvestment
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Figure4Serviced Industrial Land Plots (SILP)
Source:KnightFrankThailandResearch,andIndustrialEstateAuthorityofThailand
ThetotalsupplyofSILPsinQ12013reached120,425Rai,representinganincreaseof6.07%Y-o-Y.Thetotalareaofoccupiedindustriallandreached104,803Rai,withatake-uprateof87.03%,againdemonstratinganincreasefrom86.5%inthepreviousquarter.
Giventhehighoccupancyratesanddemandmanyindustrialdevelopersareplanningnewestatesandparks.AstheBangkokPostreportedonJune132013:“TheIndustrialEstateAuthorityofThailand(IEAT)planstodevelop13newestates,ofwhichfourareforSMEsinfourregions,onelogisticsestateinChiangKhongdistrictofChiangRaiandanothereightsitesinthenortheasternprovincesofNakhonRatchasima,KhonKaen,UbonRatchathani,UdonThani,Mukdahan,SakonNakhon,NakhonPhanomandNongKhai.Thefocuswillbeontheautomotive,electronicsandagriculturesectors.Theproposedprojectscover14,163rai,withestimatedlandpricesof1.5millionbahtperrai.”Source:http://www.bangkokpost.com/busi-ness/news/354835/
Serviced Industrial Land Plots (SILP)
Q1 2013Manufacturing Property report
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Ourresearchrevealsthatmostoftheabsorptionofindustrialestate/parklandhasoccurredintheBOIZone2.
Figure5
Net Absorbtion
Source:KnightFrankThailandResearch,andIndustrialEstateAuthorityofThailand
Figure6
Industrial Land Value by Zone
Source:KnightFrankThailandResearchRemark:*asofJune2013
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IndustriallandpricesinthefivezonesmonitoredbyKnightFrankhaveallincreasedfromlastyear.Withavailableindustriallandbecomingincreasinglyscarce,TheEasternSeaboardandCentralEasternZonesarethepopularlocationsduetotheproximitytoLaemChabangport,infrastructure,androadnetworkimprovement,andassuchhaveseenthegreatestimprovements.
However,itisalsoencouragingtoseelandpricesintheNorthernZoneincreaseby5.27%y-o-yin2013asconfidenceandtransactionsslowlystarttoreturntothislocation.
Table1
Source:KnightFrankThailandResearch
Remark:*asofJune2013
Industrial land Value by Zone (Million THB / Rai) YoY % change
2011 2012 2013* 2011/2012 2012/2013*
Bangkok-SamutPrakarn-Bang-prakong 9.75 10.3 10.82 5.68% 5.03%
NorthernZone 3.75 3.72 3.91 -0.89% 5.27%
CentralEasternZone 2.26 2.49 2.72 10.18% 9.37%
WesternZone 2.83 2.89 2.99 2.21% 3.46%
EasternSeaboardZone 3.89 4.15 4.56 6.65% 9.91%
Figure7Factory Rent Market
Source:KnightFrankThailandResearch
Factory Rental Market
Q1 2013Manufacturing Property report
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Source: Knight Frank Thailand Research
Thefactoryrentalmarket’soccupancyratedippedslightlyby0.8%to86.82%inQ12013asdevelopersrespondedtorisingdemandbyincreasingthetotalsupplyofready-builtfactoriesby160,000sqmto2,665,819sq.m.
However,whilstoccupanciesfellduetonewsupply,theactualamountofspaceleasedinQ1increasedbyover116,000sqmfromthepreviousquarter.ThisfindingtallieswithrecentannouncementsbytheDepartmentofIndustrialWorkswhograntedover2,156newfactorypermitsin1H2013,up15.6%y-o-y.
Table2
Source:KnightFrankThailandResearch
Increaseddemandforleasedfactoryspacehasseentheaveragerentalrateincreaseby6.4%inQ1,withtheEasternSeaboardcommandingthehighestrents,followedbyPathumthani–Ayutthaya.
supply and demand
Figure8Net Absorption
Factory Rental Market
Average Rental Rate as of Q1 2013 (THB/Sq.m./month)
Rama2-SamutSakhon
Pathumthani-Ayutthaya
Suvarnabhumi-Bangpakong EasternSeaboard
Q12013 120.94 186.51 180 207.98
2012 120 179.5 169.21 196.5
%Change 0.78% 3.90% 6.37% 5.84%
rents
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outlook Despitecurrencyconcerns,thelevelsofFDIseeninthemanufacturingsectorsinthefirsthalfofthisyearareveryencouragingandweexpect2013tobeanotheryearofstronggrowthinFDI.TheBoardofInvestment’snewpromotionpolicyisscheduledtobecompletedbytheendof2013andwillbeeffectiveinJan2015providingaperiodofadjustmentforinvestors.Atthattimethelocation-based‘3Zonepolicy’willbediscardedinfavourofapolicythatpromotesinvestmentin10majorareasthataredeemedtobemorefavourabletoThailand,suchasadvancedandgreentechnology,aswellaslogistics.Thiswillmeanthatsomeactivitieswillnolongerbeeligibleforpromotion,orasmanytaxprivileges.However,firmswhoengageinResearch&Developmentand/orchoosetolocateinindustrialestatesmayalsoqualifyforadditionalfinancialincentives.
Asinvestorssubmittheirinvestmentapplicationsaheadoftheplannedpolicychanges,andfirmsseektoestablishapresenceherebeforetheformationoftheASEANEconomicCommunity(AEC),KnightFrankexpectstoseeanincreaseindemandforrentedfactoriesandindustriallandoverthenext18
Figure9Average Rental Rate
Source:KnightFrankThailandResearch
Q1 2013Manufacturing Property report
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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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Thailand ContactsPhanom KanjanathiemthaoManaging Director+66 (0)2643 8223 Ext [email protected]
Chaturawit WattanaprukExecutive Director+66 (0)2643 8223 Ext [email protected]
Surasak Limpa-ArayakulExecutive Director, Head of Valuation and Advisory+66 (0)2643 8223 Ext [email protected]
Roong SitthisankunchornExecutive Director, Head of Property Management+66 (0)2643 8223 Ext [email protected]
Marcus BurtenshawExecutive Director, Head of Commercial Agency+66 (0)2643 8223 Ext [email protected]
Frank KhanExecutive Director, Head of Residential +66 (0)2643 8223 Ext [email protected]
Risinee SarikaputraDirector, Research and Consultancy+66 (0)2643 8223 Ext [email protected] Phuket ContactNattha KahapanaExecutive Director, Knight Frank Phuket+66 (0)7631 8151 Ext [email protected]
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