Knight Frank Thailand revealed Thai exports are experiencing a downturn from the continued slowing of the global economy. Some rental warehouse developers have postponed their expansion on the new logistics parks. The new supply entering the market is expected to be slacking off. However, the occupancy rate trends to be stable as the net take-up increases at the same level as the new supply. The rental rate is forecasted to remain constant due to the balance level of new supply and new demand, putting pressure on price competition and preventing a price rise. In addition, progress on infrastructure, including the Laem Chabang port expansion, and the road and rail network development, is still the key positive factor that drives private investment and logistics space demand.
Mr. Marcus Burtenshaw, Executive Director and Head of Commercial Agency, Knight Frank Thailand Co., Ltd. said, “Some warehousing locations are clearly faring better than others. New supply needs to be constrained in areas of falling occupancy. Despite this, the underlying fundamentals that originally established each of the major strategic distribution locations are the same. Demand for warehousing space continues to grow, as e-commerce begins to take an even bigger role in the retail landscape in Thailand.”
According to Knight Frank Thailand’s research, at the end of the first half of 2016, the total warehouse supply was at 3,732,147 square metres, representing an increase of 4.1% from the end of the last period with 145,737 square metres being added to the market. The latest peak in the addition of supply was still from 2014, which was when the country’s largest developer completed its three largest projects. Since then, the market saw relatively incremental increases in supply to cope with a slowing growth in demand. For the remainder of 2016 all the way to 2017, approximately 300,000 square metres of warehouse supply is expected to enter the market. Up to 250,000 square metres of this would be in Samutprakarn province as the location offers a healthy level of demand and high levels of occupancy.
The total occupied space for the period was at 2,909,594 square metres, an 8.7% increase from the previous period; this amounts to an occupancy rate of 78.0%. Based on the occupancy trend, both supply and occupied space have been increasing at a similar rate, keeping the occupancy level relatively stable around 77.5 to 78.5%. Figure 4 shows the net absorption rate of 129,982 square metres for only the first half of the year. The warehouse occupancy rate as of H1 2016 was at 78.0% — a small jump of 0.5% from last year’s figure. The Eastern Seaboard saw the highest jump in occupancy whereas the Greater Bangkok region (Suvarnabhumi-Bangpakong) enjoyed the highest warehouse occupancy rate. Pathumthani – Ayutthaya still witnessed a continued reduction in its occupancy rate since the 2011 floods — and the condition was further worsened by the addition of new supply.
The warehouse rental rate remained relatively stagnant in Thailand. As of H1 2016, the average warehouse rental rate is at THB 156.9 per square metre per month. The region that saw the highest HoH growth was the Eastern Seaboard with an increase of 0.5% from THB 148.9 to THB 149.6 per square metre per month. Bangkok as a province maintained its position as the most expensive area along with Pathumthani, with the highest asking rent of THB 185 per square metre per month. In contrast, Khon Kaen had the lowest asking price of THB 110 baht per square metre.
The current rental rate is at the maximum of 185 baht per square metre per month in Bangkok and Pathumthani, followed by the maximum rent of 180 baht per square metre per month in Samutprakan, Chonburi and Chachoengsao. Generally, warehouses command variable rents, depending on building location, design, condition and age. The modern logistics parks usually provide docks, raised floors, a floor loading capacity of up to 3 tonnes per square metre, and ceiling heights of 10 metres.