H2 2014 Manufacturing Property Report · Property Report Figure 5 Table 2 industrial land price...
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H2 2014 Manufacturing Property Report research • Industrial land sales dropped to 2,276 rai, the lowest in the past few years. There were only 937 rai in H1 2014 and 1,339 in H2 2014 due to political unrest. • Factory occupancy rates stood firm at 77.6% in H2 2014, a reduction of 0.1% year on year. • The highest factory rental rate growth was seen in the Eastern Seaboard with an increase of 5.6%, however, the rental rates in Pathumthani – Ayutthaya, and Suvarnabhumi – Bangpakong remained stable. highlights
Transcript of H2 2014 Manufacturing Property Report · Property Report Figure 5 Table 2 industrial land price...
H2 2014Manufacturing Property Report
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• Industriallandsalesdroppedto2,276rai,thelowestinthepastfewyears.Therewereonly937raiinH12014and1,339inH22014duetopoliticalunrest.• Factoryoccupancyratesstoodfirmat77.6%inH22014,areductionof0.1%yearonyear.• ThehighestfactoryrentalrategrowthwasseenintheEasternSeaboardwithanincreaseof5.6%,however,therentalratesinPathumthani–Ayutthaya,andSuvarnabhumi–Bangpakongremainedstable.
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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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H2 2014Manufacturing Property Report
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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H2 2014Manufacturing Property Report
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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