Knight Frank expects a rise in land values

Knight Frank expects a rise in land values
Knight Frank expects a rise in land values

That at the end of 2011, the total area of occupied serviced industrial land plots in Thailand reached 100,344 rais. In a recent press release Knight Frank Thailand’s Industrial Research team disclosed that the Thai floods inundated seven industrial estates, accounting for 18.93 per cent of the total supply of Serviced Industrial Land Parcels (SILPs).

The NESDB reported that GDP in Q4 2011 declined to -9 per cent the lowest growth recorded since the economic crisis of 1997, while sales of serviced industrial land parcels, and occupancies of ready built factories and warehouses all increased in Q4 2011. “Dry” BOI Zone 2 locations are in most demand followed by the Eastern Seaboard as firms wish to avoid locations that flooded or areas considered being at risk of future floods. Land values are set to rise in the Eastern Seaboard and dry locations by 5-10 per cent in 2012, whereas estates which flooded with find it difficult to secure investors without offering significant discounts and comprehensive flood prevention measures.

Marcus Burtenshaw, director of the Commercial Agency Department, Knight Frank Chartered Co. Ltd. said that at the end of 2011, the total area of occupied serviced industrial land plots in Thailand reached 100,344 rais, with a takeup rate in Q4 of 80.13 per cent increasing from 79.24 per cent in Q3. During the fourth quarter of 2011, the total recorded SILP sales were 3,783 rais, an increase of 48.18 per cent Q-o-Q, which equates to an increase of 451.46 per cent from the same period in 2010. Most of SILPs sold in the final quarter of 2011 were located in Zone 2 comprising 66.48 per cent of the total or 2,515 rai, whereas 1,224 rai were sold in Zone 3.

The total SILPs supply in Q4 2011 was 125,223 rai, which increased by 0.26 per cent Q-o-Q, and 6.68 per cent Y-o-Y. As at the end of 2011, approximately 27,111 rai of new SILPs were under development. Approximately 60 per cent of these or 16,437 rai are located in BOI Zone 2, and almost half of those, (8,226 rai) are being built at Phase 2 of the Amata Nakorn Industrial Estate in Chonburi whereas 15,585 rai of SILPs are expected to be added to the Eastern Seaboard.

Burtenshaw explained that in Q4 2011, 16 new factories from the leading developers entered the market, bringing the total supply of RBFs to 660 during Q4 2011 with the total space of 1,535,973 (sqm), an increase of 3.47 per cent from the same period last year while the occupancy rate was 92.75 per cent in the fourth quarter 2011. A total of 539 factories have been leased with the overall occupied area of 1,283,522 (sqm). “This year Knight Frank expects to see at least 250,000 (sqm) of new supply enter the RBF market,” he said.

The supply of warehouses increased by 6.53 per cent Q-o-Q to 359,363 (sqm), and in the wake of flood related relocations, their occupancy rates increased to 95.49 per cent. Burtenshaw advised prospective tenants that there is now a limited supply of in the choice locations as rather than relocating, occupiers have been acquiring additional satellite premises in locations outside of the flood zones. Demand for quality modern warehousing space with raised floors, docks and ceilings of at least 10m has been so strong in some locations that we advise tenants to make decisions and place deposits fast in order to avoid disappointment.

In the Q4 2011 the average rental rate for a grade A modern distribution center stood at THB 149.45 /sqm/month, whereas grade B warehouses still sought average rents of THB 142.83 /sqm/month, and the average grade C warehouse rents were THB 87.12 /sqm/month. However, warehouses in Bangkok are often older properties but can fetch an average rental rate of THB 129.37 /sqm/month; a reflection of the limited supply and the relatively high land values in these locations. Burtenshaw concluded that prices in so called “dry estates” and Eastern Seaboard to increase between 5-10 per cent during 2012, in line with increased demand as factories relocate from flooded areas, and demand from new investors focuses on those estates which escaped the floods.

However, they will still find it difficult to secure new investors, without offering significant discounts and demonstrations that they can provide comprehensive flood prevention measures. He added that “despite the recent challenges, Thailand is able to retain its position as one of the most favoured destinations for Foreign Direct Investment in the ASEAN region because it is an overall low cost manufacturing location where it is relatively free of red tape, and is supported by a large skilled workforce, with good infrastructure, strategic geographical location, and a competitive package of business oriented investment incentives.”