APPD Market Report Article
ThailandSeptember 4, 2023
Anawin Chiamprasert, Head of Research & Consultancy, Thailand
Demand remains strong in strategic locations
- A healthy net absorption of 137,100 sqm was recorded in 2Q23. The demand remained strong for Prime grade warehouses, especially in Samut Prakan and Ayutthaya, where we have also seen an increase in rents.
- Warehouses in Samut Prakan, especially along Bang Na-Trat Road, continued to perform well, with access into Bangkok being a key factor. The Eastern Economic Corridor has also performed well with the increase in manufacturing demand. A notable difference in rents was observed between warehouses with direct access to Bang Na-Trat Road and those that are located on secondary roads.
Vacancy rises with the new supply influx
- Prime grade warehouse stock was recorded at 5,112,400 sqm, growing 3.7% from the previous quarter. The new supply was from the completion of projects such as TIP 9 Industrial Project, which completed Phase 2, Frasers Property Logistics Wangnoi 2 – Project (eDC), and WHA Mega Logistics Center Theparak Km. 21.
- The vacancy rate has increased from 10.3% in 1Q23 to 10.8% in 2Q23, a 0.5% increase from the previous quarter, which was as a result of the new supply influx.
High development costs drive rent growth
- Capital value was recorded at THB 31,788 per sqm, increasing 0.1% q-o-q and 7.45% y-o-y. This increase is mainly due to the increased cost of construction and land prices, as suitable land for development remains scarce.
- Prime grade warehouse rent rose to THB 162 per sqm, per month, in 2Q23. Strong demand in Samut Prakan and Ayutthaya have resulted in an increase in rent, especially in new developments with convenient access to main roads.
Outlook: Large supply to increase competition in the market
- In 2023, total stock is projected to increase by 600,000 sqm as parts of Bangkok Free Trade Zones 3, 4, and 5 are scheduled to be completed, along with Phase II of Frasers Property Logistics Bangplee 7. However, some of the supply pipeline includes built-to-suit warehouses that can be phased out based on leasing activity.
- Vacancy is expected to rise to 13.5% as a result of the completion of new supply. Despite that, we expect a slight increase in average rent as landlords try to balance the rent with the high development costs, as well as high demand in the current hotspots.