Supply Chain Consulting

Knight Frank Thailand Foresees Intensifying Competition in Warehouse Market

Knight Frank Thailand Foresees Intensifying Competition in Warehouse Market
Danny Gill

Knight Frank Thailand Foresees Intensifying Competition in Warehouse Market, particularly between Samut Prakarn and Eastern Seaboard in Thailand.

The competition among Samut Prakarn and the Eastern Seaboard will be intensified throughout 2016 by the fact that new warehouse projects from local developers are surfacing in the areas. Furthermore, increased investment in warehousing projects outside tradition areas is expected, thanks to a planned government investment of two trillion baht in infrastructure, including the East – West corridor and the Chinese – Laos – Thai rail link.

Mr. Marcus Burtenshaw, Executive Director and Head of Commercial Agency, Knight Frank Thailand Co., Ltd. said,  “Land values in the most popular locations of Samut Prakarn that are suitable for warehousing development are starting to reach levels where new projects are becoming harder to justify. Therefore in the midst of sustained demand, I expect to see increased upward pressure on rents in this province. This puts tenants in the position where they will have to more carefully weigh the value of the premium paid for a warehouse close to Bangkok, versus an identical property located further away.”

According to Knight Frank Thailand’s research, Samut Prakarn and Chonburi provinces currently remain the most strategic locations where logistics service providers base their distribution centres. Samut Prakarn tops the chart in terms of supply, accounting for 36% of the entire market. The province is located next to Bangkok on the east with major road access, including connectivity with the Eastern Seaboard via Bangna-Trad Road. Samut Prakarn is also home to Bangpoo Industrial Estate, Bangplee Industrial Estate, and Suvarnabhumi International Airport. Chonburi province, which is home to Laem Chabang Seaport and the hub of automotive production, places second with 24% of the supply.

Figure 1: Warehouse Supply by Provinces

figure 1

Source: Research and Consultancy Department, Knight Frank Thailand Co., Ltd.

There will be 364,000 sq.m. of warehouse supply entering the market in 2016, approximately 112,000 sq.m. or 30% of which will be in Samut Prakarn as a result of healthy demand and high occupancy in the province. The research also revealed the total warehouse supply of 3,639,097 sq.m. in 2015. This marked an increase of 9.5% from the previous year. However, warehouse supply has managed to increase 15.6% on average each year between 2011 and 2015.

Figure 2: Warehouse Market Supply

figure 2

Source: Research and Consultancy Department, Knight Frank Thailand Co., Ltd.

By the end of 2015, the total rented space was at 2,845,021 sq.m., up 8.7% from the previous year, in which a total of 228,329 sq.m. were taken up. The average occupancy rate stood at 78.2% with Suvarnabhumi-Bangpakong outperforming other locations by reaching the highest occupancy rate of 86.5% while Pathumthani-Ayutthaya achieved 79.7%. The Eastern Seaboard attained only 62.8% occupancy rate. This drop was caused by a relatively large supply having emerged in the area during 2012 to 2013.

Figure 3: Supply, Demand and Occupancy Rate of the Warehouse Market in Thailand

figure 3

Source: Research and Consultancy Department, Knight Frank Thailand Co., Ltd.

According to Knight Frank Thailand’s research, the current rental rate of a warehouse property is as high as 185 baht per sq.m. per month in Bangkok and Pathumthani while rent in Samut Prakarn, Chonburi, and Chachoengsao is 180 baht per sq.m. per month at maximum. The research reiterated that the location of the warehouse is a major factor that determines rental rate. However, other factors can also affect rental rates, including but not limited to design, condition and the age of a building.

Figure 4: Warehouse Rental Rate by Provinces

figure4

Source: Research and Consultancy Department, Knight Frank Thailand Co., Ltd.

 

Supply Chain Consulting
Danny Gill

Danny is currently a Contributing Writer for Airfreight Logistics and Logistics Manager (LM) and is quite the foodie. He’s always on the hunt for new and exciting dishes to sample, and is never one to back down from a spicy challenge. His travels have taken him around the world, and he’s been able to experience many different cultures (and food).

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