Strong demand remains amidst global challenges

• Thailand’s economy has experienced a steady recovery due to the revival of tourism and improved domestic consumption. Additionally, the emergence of new industries, particularly EV manufacturing, is expected to propel the demand for logistics facilities. Nevertheless, Thailand’s manufacturing and exporting sectors are facing challenges from global economic and geopolitical uncertainty.
• The net absorption of Prime Grade warehouse space was healthy, recording at 41,000 sqm in the quarter. For the whole year of 2023, total absorption of approximately 318,000 sqm was recorded.

Market supply significantly expands as activity fully resumes

• A total of 99,000 sqm of new supply was added to the market in 4Q23. The new completions came from Alpha Rangsit, Alpha Bangna km.19 and Bangkok Free Trade Zone 3. The net increase was a record high in 2023, totalling 554,000 sqm, as a result of a project delayed from the pandemic period.
• The vacancy rate rose by 0.9% q-o-q to 11.4% in 4Q23, due to roughly 98,900 sqm of new supply completing during the quarter, mainly in Samut Prakan and Pathum Thani provinces.

Warehouse rents see a slight decrease as vacancy rises

• The average rent has dropped from THB 162 per sqm per month in 3Q23, to THB 158 per sqm per month, decreasing by 2.4% q-o-q and 1.6% y-o-y. This drop is a result of a market correction due to the addition of supply as well as older assets commanding lower rents than the market average.
• Capital value decreased by 2.4% q-o-q due to higher capital costs and stagnant rents, while the market yield remained at 6.1% in 4Q23.

Outlook: Stock continues to grow despite stiff competition

• Stock growth is likely to remain strong, continuing what was observed in 2023. Approximately 330,500 sqm of new supply from key developers such as Frasers Property, Alpha Industrial Solutions, Bangkok Free Trade Zone and ESR, is planned to be completed within the year 2024.
• We anticipate minimal change to rents, as strong competition can hinder the ability of new projects to command significant premiums. At the same time, the rent gap between older and newer assets is becoming more apparent, and will likely play a role in balancing the overall average rents in the market.