Thailand storage wars – Competition ramps up

Construction News

Thailand storage wars - Competition ramps up

Competition in the warehouse market, particularly in Samut Prakan and the Eastern Seaboard, is expected to heat up this year as local developers get in on the act, according to property consultant Knight Frank Thailand Co.

Increased investment in warehouse projects outside traditional areas is also expected, thanks to the government’s planned 2-trillion baht investment in infrastructure, which includes the East-West Economic Corridor and the Chinese-Laotian-Thai rail link.

Marcus Burtenshaw, executive director and head of property consultancy Knight Frank Thailand, said land values in the most popular locations of Samut Prakan that are suitable for warehouse development were starting to reach levels where new projects were becoming harder to justify.

In the midst of sustained demand, he expects to see increased upward pressure on rents in the province. This will force tenants to think more carefully when weighing the value of the premium paid on a warehouse close to Bangkok versus an identical property located further away, he said.

According to Knight Frank Thailand’s research, Samut Prakan and Chon Buri provinces are the most strategic locations where logistics service providers base their distribution centres. Samut Prakan tops the list in terms of supply, accounting for 36% of the entire market.

The province is located next to Bangkok to the east with access to major roads, including connectivity with the Eastern Seaboard via Bang Na-Trat Road. Samut Prakan is also home to Bangpoo Industrial Estate, Bangplee Industrial Estate and Suvarnabhumi airport. Chon Buri province, which is home to Laem Chabang seaport and a hub for automotive production, places second with 24% of supply.

There will be 364,000 square metres of warehouse supply entering the market in 2016, roughly 112,000 sq m or 30% of which will be in Samut Prakan where there is healthy demand and high occupancy rate. The research also revealed that total warehouse supply in 2015 was 3,639,097 sq m. This marked an increase of 9.5% on the prior year, though warehouse supply has grown on average 15.6% each year from 2011 to 2015.

By the end of 2015, total rented space was 2,845,021 sq m, up 8.7% from 228,329 sq m in the previous year. The average occupancy rate stood at 78.2%, with Suvarnabhumi and Bang Pakong outperforming other locations by reaching the highest occupancy rate — 86.5%. Pathum Thani and Ayutthaya reached 79.7%, while the Eastern Seaboard only managed a 62.8% occupancy rate. This drop was caused by a relative supply glut that emerged in the area between 2012 and 2013.

According to Knight Frank’s research, the current rental rate for warehouses is as high as 185 baht per sq m per month in Bangkok and Pathum Thani. Rental rates in Samut Prakan, Chon Buri and Chachoengsao are a maximum of 180 baht per sq m per month.

The research, unsurprisingly, reinforced the view that the location of the warehouse is a major factor in determining rental rates.