q1 2013 manufacturing property report - knight frankas the bangkok post reported on june 13 2013:...

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.

www.KnightFrank.co.th

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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)



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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


Factory Rental Market



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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


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




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Appendix: Factory Rental Market : purposebuiltfactoriesforrentfromallmajordevelopers,butnotlimitedtoindustrialestatelocations. SILP : servicedindustriallandparcelslocatedinindustrialestates,zonesandparks.

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 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.

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.

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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q1 2013 manufacturing property report - knight frankas the bangkok post reported on june 13 2013:...

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