ESR eyes Thai industrial property, launches 35 billion baht investment spree
Logistics, warehouses and data centres are on the rise in Thailand with asset-management firm ESR, aiming to invest 3.5 billion baht in five years, executives from the company said.
They say their move is part of a shift among regional investors from a preference for hotels, offices and retail to heightened interest in industrial real estate.
The disruption from the Covid-19 pandemic is the main driver of the shift, they say.
The popularity and fast-paced growth of e-commerce platforms have increased the number of online sellers in the last three years. This has caused an increased demand in the real-estate business for warehouses for rent. Logistics businesses or modern industries, such as data centres, are high in demand and expanding rapidly, attracting foreign companies interested in investing in Thailand.
Recently, ESR Group, a global industrial real-estate giant, has invested in the logistics industry and data centre in Rojana Industrial Estate and Asia Industrial Estate, which is a potential location between Bangkok and the development of the Eastern Economic Corridor (EEC).
Jai Mirpuri, who leads development for ESR Group in Singapore Development and Thailand, said: “As the second-largest economy in Southeast Asia, Thailand is an important component of ESR’s strategy for this important region. The government has launched Thailand 4.0 to transform the country into a value-based economy, which includes key sectors such as new-generation e-commerce, logistics, automotive, and digital industries.”
Over the next five years, ESR (via its development funds) intends to invest a further US$1 billion in Thailand, in line with the country’s projected GDP growth at 3.28% from 2022 to 2027. We believe that the strategic locations, compelling offerings and sustainable features of our properties, backed by our local team of experts, will attract tenants that are MNCs [mulitnational corporations] in the New Economy and high-growth sectors,” he said.
The company currently has two projects under development in Thailand with an investment value of 8 billion baht.
The first project, expected to be completed by the end of 2025, is strategically located in Rojana Industrial Estate Laemchabang and has a land area of about 100 rai (160,000 square metres) and a gross floor area (GFA) of 93,000 sqm. It is situated 15 minutes from the Laem Chabang deep seaport in Chonburi province, which has been identified as part of the EEC development by the Thai government to encourage investment, uplift innovation, and advanced technology.
The second, due for completion by the end of 2026, is in Asia Industrial Estate Suvarnabhumi and has a land area of about 225 rai (363,500 sqm) and a GFA of 253,500 sqm. Being close to Suvarnabhumi International Airport and multiple access routes to the centre of Bangkok, other economic centres in Thailand and Laem Chabang port, the project is in an ideal location for the development of a national distribution hub for logistics companies, e-commerce operators, aggregation and distribution of goods via air freight as well as the movement of temperature sensitive goods.
In addition to these two properties, ESR is exploring opportunities to invest in other locations with significant potential for logistics growth, such as the Bangna-Trad, ECC, and Wang Noi areas. It plans to subsequently expand to other provinces, including Chiang Mai, Surat Thani, and Khon Kaen.
Sayarm Tongkrabin, director of investments and asset management at ESR Thailand, said:
“The trend of real estate in the category of hotels, offices and retails will decrease in popularity from now on. After the subprime crisis affected investors around the world, including Thailand, there was a continuous crisis in the political situation and up until Covid-19, the hotel business has been severely affected. Investors postponed their investments and lately there has been an oversupply problem. Returns have been bad for a while now, with office and retail yields low at only 5-6%.”
“The past crisis reinforces and makes it clear that investment in industrial properties is relatively stable. Although industrial properties are not as attractive as a hotel ... the return is quite good and after Covid-19, the return on investment is noticeably better,” Sayarm said, adding: “More importantly, the demand is much higher than before.”