Industrial land values set to rise in dry areas

 The floods inundated seven industrial estates, accounting for 18.93 per cent of the total supply of serviced industrial land parcels (SILPs), the research found. The National Economic and Social Development Board reported that gross domestic product in the fourth quarter of last year declined by 9 per cent, the worst performance since the economic crisis of 1997, while sales of SILPs and occupancies of ready-built factories and warehouses all increased in the quarter.
“Dry” BOI Zone 2 locations are in most demand, followed by the Eastern Seaboard as companies wish to avoid locations that flooded or areas considered to be at risk of future floods. Land values are set to rise in the Eastern Seaboard and dry locations by 5-10 per cent this year, whereas estates that flooded will find it difficult to secure investors without offering significant discounts and comprehensive flood-prevention measures.
Marcus Burtenshaw, director of the commercial agency department at Knight Frank Chartered (Thailand), said that at the end of 2011, the total area of occupied SILPs in Thailand was 100,344 rai (16,055 hectares), with a take-up rate in the fourth quarter of 80.13 per cent. That was up from 79.24 per cent in the third quarter.
During the fourth quarter, total recorded SILP sales were 3,783 rai, an increase of 48.18 per cent quarter on quarter, which equates to an increase of 451.46 per cent from the same period in 2010. Most SILPs sold in the final quarter of 2011 were 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 SILP supply in the fourth quarter was 125,223 rai, an increase of 0.26 per cent quarter on quarter, and 6.68 per cent year on year. As at the end of 2011, about 27,111 rai of new SILPs were under development. About 60 per cent of these or 16,437 rai were in BOI Zone 2, and almost half of those (8,226 rai) were being built at Phase 2 of the Amata Nakorn Industrial Estate in Chon Buri, whereas 15,585 rai of SILPs were expected to be added to the Eastern Seaboard.
Burtenshaw said that in the fourth quarter of 2011, 16 new factories from the leading developers entered the market, bringing the total supply of ready-built factories to 660 with total space of 1,535,973 square metres. That was an increase of 3.47 per cent from the same period last year, while the occupancy rate was 92.75 per cent. A total of 539 factories were leased with overall occupied area of 1,283,522sqm.
“This year Knight Frank expects to see at least 250,000sqm of new supply enter the RBF [ready-built factory] market,” he said.
Meanwhile, the supply of warehouses increased by 6.53 per cent quarter on quarter to 359,363sqm, and in the wake of flood-related relocations, their occupancy rates increased to 95.49 per cent. Burtenshaw advised prospective tenants that there was now a limited supply in the choice locations, as rather than relocating, occupiers have been acquiring additional satellite premises in locations outside the flood zones.
“Demand for quality modern warehousing space with raised floors, docks and ceilings of at least 10 metres 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 fourth quarter, the average rental rate for a grade A modern distribution centre was Bt149.45 per square metre per month, whereas grade B warehouses still sought average rents of Bt142.83 per square metre, and the average grade C warehouse rents were Bt87.12. However, warehouses in Bangkok are often older properties but can fetch an average monthly rental of Bt129.37 per square metre, a reflection of the limited supply and the relatively high land values in these locations.