Thailand Industrial Estate Marketing Report Half Year 2012

H2 2011 - H1 2012

Supply

demand

pRICe

oCCupanCy

IndustrIal EstatE MarkEt rEPOrt

tHaIland

www.colliers.co.th

Industrial Estate MarketHIgHlIgHtS Thailand’s industrial estates are recovering from the floods of 2011, with demand for and supply of industrial space up in the first half of 2012, along with occupancy rates and prices, compared to the last six months of 2011.

The floods last year were the latest in a series of crises to hit the sector.

Foreign investment was badly hit by the 2008 global financial downturn, and was not helped by political upheaval including the airport blockade in 2008 and protests in 2010.

By the end of the first half of this year, around 60% of factories affected by the 2011 floods had resumed operation, and take-up of industrial estates in every zone has increased compared to the last six months of 2011.

The Eastern Seaboard, which was relatively unaffected by flooding, has seen the greatest take-up this year and is the dominant area for Thailand’s industrial estate activity, both for new investors and for those looking to move operations away from central areas, which were worst affected by the floods.

Japan remains by far the largest foreign investor in Thailand, with Japanese investments during the first half of 2012 more than equalling the total investment of all other countries during the period 2008-2010.

the Industrial Estate authority of thailand (IEat) is focusing more and more on thailand’s border provinces, such as Kanchanaburi and Chiang Rai, which stand to benefit both from increasing trade with Myanmar and from the ASEAN Economic Community planned for 2015.

The total supply of industrial estates in the first half of 2012 was around 128, 450 rai.

1ST half 2012 | INDUSTRIal

maRket IndICatoRS

1 RaI = 1,600 Sq m

1 HeCtaRe = 6.25 RaI

1 aCRe = 2.53 RaI

1 RaI = 400 Sq waH

ConveRSIon table

Supply

Approximately 2,590 rai were added in the first half of 2012 with the total supply of SILPs increasing to nearly128,450 rai. All industrial estates in the flood area postponed their expansion plans and are waiting

for their barriers to be completed, so new additional supply in the first half of 2012 was in the Eastern area only.

The total supply in the first half of 2012 was around 128,450 rai. The Eastern Seaboard and Central areas account for more than 95% of the total supply. More than 82,000 rai or approximately 64% was in the Eastern Seaboard area and this continues to increase, especially after the floods in the Central area in the fourth quarter of 2011. In addition, some industrial estates are planned for development in the southern Seaboard area.

Many industrial estate developers were planning to develop many new industrial estates and expand their current industrial estates, especially in non-flood areas, such as Chonburi, Rayong, Prachinburi and some neighbouring provinces.

Source: Colliers International Thailand Research

Source: Industrial Estate Authority of Thailand, Board of Investment (BOI) and Colliers International Thailand Research

HIStoRICal Supply – SIlpS, H1 2012

Supply by loCatIon, H1 2012

COLLIERS INTERNATIONAL | P. 2

INDUSTRIal eSTaTe MaRkeT RePORT | FIRST HALF 2012

FutuRe Supply SCHeduled to be Completed In tHe FutuRe, H1 2012




A total area of around 59,300 rai, has received approval from the IEAT and/or Board of Investment to be developed as SILPs. This land will be developed gradually in phases but it is not known when it will be available for sale or rent. The Eastern Seaboard area shows the largest expected increase with a total of more than 24,200 rai followed by the Southern Seaboard with approximately 21,300 rai.

the Industrial Estate authority of thailand (IEat) also plans to develop new industrial estates in many provinces around Thailand. Some of

them have begun studies already and decisions should be made this year for the actual location and total land area. The IEAT is focusing more on the neighbouring provinces around the border of Thailand, such as Kanchanaburi to support the Dawei project and Chiang Rai province to support import and export to China via theR3A road and to Laos via the new friendship bridge.

The take-up rate in every zone increased in 2011, even in the flood-affected Central area, due to increased demand in the first half of the

year. Some investors from flooded areas are planning to move to the Eastern Seaboard Area or other locations in 2012.

The global economic downturn severely curtailed industrial foreign investment in Thailand and this was not helped by the airport blockade

at the end of 2008 and political protests in 2010. The level of investment has picked up but still remains weak compared to pre-crisis levels.


Source: Board of Investment (BOI) and Colliers International Thailand Research

aveRage take-up Rate FRom 2009 - H1 2012 by loCatIon

FoReIgn dIReCt InveStment (FdI) by yeaR, H1 2012


demand

demand dRIveRS



FdI by SeleCted CountRIeS, H1 2012

boI CeRtIFICateS ISSued H1 2012 by InveStment

Source: Bank of Thailand and Colliers International Thailand Research

Source: Board of Investment and Colliers International Thailand Research

The Japanese remain by far the biggest foreign investors in Thailand. The level of Japanese investment in the first half of 2012 has already

more than equalled the total investment from other foreign countries during the period 2008 - 2010.

The BOI divides Thailand into three zones based on the level of economic development. The zones provide the basis for the various incentives given to investors, with the poorer zones offering longer tax breaks, for example. Zone 1 consists of Bangkok and the neighbouring provinces; Zone 2 is where most of the industrial estates are located and includes Chonburi, Rayong and Ayutthaya; Zone 3 covers the poorer provinces and is further subdivided according to the level of development.

While Zone 2 commands the lion’s share of investment it is interesting to note the paucity of outlay being provided to the poorest 22 provinces of

Zone 3.

However, in the first half of2012 investment dramatically increased compared to the second half of last year, with Zone 1 and Zone 3investment increasing by around 244% and 123% respectively from the second half of 2011. In addition, total investment value so far in 2012 is also more than in the first half of 2011, before that year’s floods.

InveStment by boaRd oF InveStment (boI) Zone



the Manufacturing Production Index indicates the volume of production and the general health of the industry. Overall, the situation has been one of recovery from the floods in Q4 2011, although it is still lower than the

past one to two years, due to many factories just restarting their operations again after the floods and some factories being shut down.

The minimum wage of THB300 per day has had a big impact on SME industry in Thailand, so the number of new factories permitted decreased in April by more than 15% from March and continues to fall. In addition,

some new investors are still concerned about the floods and are waiting to see the situation this year before make a decision.

Source: Bank of Thailand and Colliers International Thailand Research

Source: Department of Industrial Works and Colliers International Thailand Research

manuFaCtuRIng pRoduCtIon Index FRom 2008 - H1 2012 by quaRteR

new FaCtoRIeS peRmItted FRom JanuaRy 2011- June 2012



pRopoRtIon oF InveStoRS In InduStRIal eStateS H1 2012 by appRoved RegISteRed CapItal

Source: Industrial Estate Authority of Thailand and Colliers International Thailand Research

The Japanese remain the largest investors in Thailand with approximately 50% of the total, followed by East Asian countries with 12%. While Europe, North America and ASEAN have some share, other parts of the world have very limited manufacturing facilities here.

From January to June 2012, Japanese investors received promotion certificates for a total of 291 projects from the BOI with a total value of THB106.3 billion, representing around 62% of total foreign investment in the first six months of 2012.


land pRICeS, H1 2012


The selling price of land in industrial estates or industrial parks is based on factors such as location, proximity to transport facilities, infrastructure and a supplier base Bangkok commands the highest land prices as it is a centre of transport which includes the sea ports and international airport. Second and third are Chonburi province and Chachoeng Sao province, respectively. The wide variation of prices in Chonburi and Chachoeng Sao provinces is due to a number of industrial estates being

located close to Bangkok while others, mostly pulp and paper manufacturers, is located further away from the capital. Provinces such as Prachinburi and Saraburi have much cheaper land prices due to their locations far from Bangkok or port facilities. However, after the floods in the North Central areas of Thailand land prices rose in the Eastern industrial estates by around THB500,000 per rai.


boI CeRtIFICateS ISSued H1 2011 by InveStment


FoReCaStAfter the floods last year, industrial estate developers in flooded areas were looking for new development locations for their industrial estates outside the flood area. In addition, some factories also moved to other provinces, especially the Eastern Seaboard area, although the Board of Investment (BOI) was offering more incentives for new investment projects in Ayutthaya and Pathumthani provinces and to existing investors who were affected by the floods.

The Eastern Seaboard area is more popular after the floods and a lot of new investors have focused on this area. Many new industrial estates are planned for development in the area over the next few years; in addition, existing industrial estates are also expanding or are looking for new areas to support growing demand from Central Thailand and new investors.

the Industrial Estate authority of thailand (IEat) is planning to develop new industrial estates in the neighbouring provinces to support the ASEAN Economic Community (AEC) in 2015, especially in Kanchanaburi, Chiang Rai, Udon Thani, Tak and Nakorn Panom provinces. All industrial estates in the border provinces are scheduled to be completed in next few years. A lot of new investors are focusing on provinces along the border of Thailand, due to their need to export to neighbouring countries and take advantage of the additional incentives that will follow the AEC in 2015.



appendIx



InduStRIal ZonIngColliers International Thailand has split the industrial estate market in Thailand into five main zones. These are:

eastern Seaboard area – This is the industrial powerhouse due to its location near Thailand’s main container port, Laem Chabang, and its proximity to Bangkok. Further growth has come about due to suppliers clustering around large manufacturers. This area covers Chonburi, Rayong, Chachoeng Sao and Prachinburi provinces.

north eastern area – the remoteness of this area and poor transport means that the area has a minor share of industrial activity. The border with Cambodia and Laos (leading to Vietnam) could provide some potential for the future. This area covers Nakorn Ratchasima and Khon Kaen provinces.

northern area – Limited industrial activity has taken place here so far due to its remote location, its predominantly agricultural environment, and its unfavourable topography. Its proximity to China has potential as trade between the two countries increases. This area covers Lamphun, Phichit, Chiang Rai and Chiang Mai provinces.

Central area – Another key industrial area due to its proximity to Bangkok and suitability as a distribution centre. This area covers Bangkok, Ayutthaya, Pathumthani, Ratchaburi, Samut Sakorn, Samut Prakarn, Saraburi, Singburi and Nakornpathom provinces.

western area – The new area for industrial estate development in Thailand. The Industrial Estate Authority of Thailand (IEAT)is planning the development of industrial estates to support the Dawei Industrial Estate and the deep sea port in Myanmar. This area covers Kanchanaburi province.

Southern Seaboard area – an underdeveloped industrial area catering mainly to the Malaysian market, with halal food produce as well as heavy industrial projects based on oil and frozen seafood products. This area covers Phetchaburi, Prachuabkirikhan, Chumporn, Nakorn Srithammarat, Songkhla and Pattani provinces. This report is concerned predominantly with Service Industrial Land Plots (SILPs) but it must be stated that a considerable number of stand-alone factories exist outside the industrial estates.

www.colliers.co.th

CollIeRS InteRnatIonal tHaIland management team INDUSTRIAL SERVICESnarumon rodsiravoraphat | associate director

ADVISORY SERVICES | HOSPITALITY Jean Marc Garret | director PROJECT SALES & MARKETINGMonchai Orawongpaisan | Associate Director RESIDENTIAL SALES & LEASINGNapaswan Chotephard | Manager RESEARCHtony Picon | associate director surachet kongcheep | senior Manager

OFFICE SERVICES Nattawan Radomyos | Senior Manager RETAIL SERVICESAsharawan Wachananont | Associate Director ADVISORY SERVICESnapatr tienchutima | associate director

REAL ESTATE MANAGEMENT SERVICESPrasert Saiphrawan | Senior Manager

INVESTMENT SERVICESNukarn Suwatikul | Associate Director Wasan Rattanakijjanukul | Senior Manager

VALUATION & ADVISORY SERVICESPhachsanun Phormthananunta | director Wanida Suksuwan | Associate Director PATTAYA OFFICEMark Bowling | Senior Sales ManagerSupannee Starojitski | Senior Business Development Manager / Office Manager

HUA HIN OFFICESunchai Kooakachai | Senior Manager

ReSeaRCHeR:

thailandsurachet kongcheepsenior Manager | researchemaIl [email protected]

This report and other research materials may be found on our website at www.colliers.co.th. Questions related to information herein should be directed to the Research Department at the number indicated above. This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. Colliers International is a worldwide affiliation of independently owned and operated companies.

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Thailand Industrial Estate Marketing Report Half Year 2012