Industrial-2012

H2 2012 | INDUSTRIAL ESTATE

thailand

Industrial Estate Market REPORT Industrial Estate Market Executive Summary

Approximately 2,700 rai were added in 2012 with the total supply of SILPs increasing to nearly 128,500 rai The Eastern Seaboard and Central areas account for more than 95% of the total supply.

A total area of around 66,600 rai, has received approval from the IEAT and/or Board of Investment to be developed as SILPs as well as which are announced to be developed or expanded. market indicators 2011 / 2012 new Supply Demand Prices Occupancy

The average take up rate of Eastern area in 2012 was highest, higher than Central area, due to the affected by the flood and a lot of new investors were occupied land plot for their new factory in the Eastern area.

The minimum daily wage of THB300 per day has had a big impact on SME industry in Thailand, so the number of new factories permitted in the second half of 2012 was continuously decreased.

Bangkok commands the highest land prices, while Chonburi province and Chachoeng Sao province in the Eastern area were followed in the second and third. The average price of the most of industrial estates in Eastern area and all locations in Thailand were expected to increase their sale price by around 5 – 10% in 2013.

Historical Supply, H2 2012

Source: Industrial Estate Authority of Thailand, Board of Investment (BOI) and Colliers International Thailand Research Note: SILPs = Service Industrial Land Plots

Approximately 2,700 rai were added in 2012 with the total supply of SILPs increasing to nearly128,500 rai. All industrial estates in the flood area postponed their expansion plans and are waiting for their barriers to be completed,

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so new additional supply in 2012 was in the Eastern area only. Some developers were looking the new location for their new development, especially in the Eastern area.

INdustrial estate market REPORT | H2 2012 Supply by Location, H2 2012

The total supply in 2012 was around 128,500 rai. The Eastern Seaboard and Central areas account for more than 95% of the total supply. More than 82,700 rai or approximately 64% was in the Eastern Seaboard area and this continues to increase, especially after the floods in the Central area in the fourth quarter of 2011. In addition, some industrial estates are planned for development in the Southern Seaboard area.

Many industrial estate developers were planning to develop many new industrial estates and expand their current industrial estates, especially in non-flood areas, such as Chonburi, Rayong, Prachinburi, Chachoeng Sao and some neighbouring provinces.

Source: Industrial Estate Authority of Thailand, Board of Investment (BOI) and Colliers International Thailand Research

Future Supply Scheduled to be Completed in the Future, H2 2012

Source: Colliers International Thailand Research

A total area of around 66,600 rai, has received approval from the IEAT and/or Board of Investment to be developed as SILPs as well as which are announced to be developed or expanded. This land will be developed gradually in phases but it is not known when it will be available for sale or rent. The Eastern Seaboard area shows the largest expected increase with a total of more than 36,800 rai followed by the Southern Seaboard with nearly 20,000 rai.

The Industrial Estate Authority of Thailand (IEAT) also plans to develop new industrial estates in many provinces around Thailand. Some of them have begun studies already and decisions should be made this year for the actual location and total land area. The IEAT is focusing more on the neighbouring provinces around the border of Thailand, such as Kanchanaburi to support the Dawei project and Chiang Rai province to

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support import and export to China via theR3A road and to Laos via the new friendship bridge. In addition, other some provinces in North eastern part of Thailand such as, Khon Kaen, Udon Thani and Nakorn Panom province. IEAT also planned to develop the first movie and entertainment industrial estate in Thailand, but still waiting for the finalized the location.

The booming of automobile industry last year was the positive factor to attracted many Japanese investors to investment the automobile industrial cluster by joint venture with Industrial Estate Authority of Thailand (IEAT). Many SMEs factories from Japan were searching the small plot of land in the existing industrial estates, so IEAT were tried to negotiate with some industrial estates to support these SMEs industries.

INdustrial estate market REPORT | H2 2012 Demand Average Take-up Rate from 2009 - 2012 by Location

Source: Colliers International Thailand Research

The take-up rate in every zone increased in 2012, even in the floodaffected Central area, due to increased demand in the first half of the year. Some investors from flooded areas are planning to move to the Eastern Seaboard Area or other locations in 2012 - 2013.

The average take up rate of Eastern area in 2012 was highest, higher than Central area. This was due to the affected by the flood and a lot of new investors were occupied land plot for their new factory in the Eastern area.

Demand Drivers Foreign Direct Investment (FDI) by Year, 2012

Source: Board of Investment (BOI) and Colliers International Thailand Research

The global economic downturn severely curtailed industrial foreign investment in Thailand and this was not helped by the airport blockade at the end of 2008 and political protests in 2010. Total foreign investment

value was approved by the Board of Investment (BOI) in 2012 is more than THB983 billion more over the total in 2011 by around 120%.

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INdustrial estate market REPORT | H2 2012 FDI by Selected Countries, H2 2012

Source: Bank of Thailand and Colliers International Thailand Research

The Japanese remain by far the biggest foreign investors in Thailand.

The level of Japanese investment in the first half of 2012 has already more than equalled the total investment from other foreign countries during the period2008 - 2010.

The total investment value were approved by Board of Investment (BOI) is approximately THB983 billion from the total 2,262 projects and all projects are expected to employed all employments approximately 268,364.

Investment by Board of Investment (BOI) Zone BOI Certificates Issued H2 2012 by Investment

Source: Board of Investment and Colliers International Thailand Research

The BOI divides Thailand into three zones based on the level of economic development. The zones provide the basis for the various incentives given to investors, with the poorer zones offering longer tax breaks, for example. Zone 1 consists of Bangkok and the neighbouring provinces; Zone 2 is where most of the industrial estates are located and includes Chonburi, Rayong and Ayutthaya; Zone 3 covers the poorer provinces and is further subdivided according to the level of development.

While Zone 2 commands the lion’s share of investment it is interesting to note the paucity of outlay being provided to the poorest 22 provinces of

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Zone 3.

However, in the second half of 2012 investment dramatically increased compared to the first six months of 2012, with Zone 1 and Zone 3 investment increasing by around 238% and 232% respectively from the first half of 2012. In addition, total investment value so far in 2012 is also more than in the first half of 2011, before that year’s floods.

INdustrial estate market REPORT | H2 2012 Manufacturing Production Index from 2008 - H2 2012 by Quarter

Source: Bank of Thailand and Colliers International Thailand Research

The Manufacturing Production Index indicates the volume of production and the general health of the industry.

Overall, the situation has been one of recovery from the floods in Q4 2011, although it is still lower than the past one to two years, due to many

factories just restarting their operations again after the floods and some factories being shut down and some were shut down their business, due to the affected by the increasing of minimum daily wage. In addition, some foreign investors were moved the investments to other country in ASEAN, such as Vietnam, Indonesia and Myanmar.

New Factories Permitted from January 2011 - December 2012

Source: Department of Industrial Works and Colliers International Thailand Research

The minimum daily wage of THB300 per day has had a big impact on SME industry in Thailand, so the number of new factories permitted decreased in April by more than 15% from March and continues to fall.

Although the number of new factories permitted in July – October 2012

were more than 380 factories per month. However, a lot of factories were close down their business, due to affected by the increasing of minimum daily wage, especially SMEs business.

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INdustrial estate market REPORT | H2 2012 Proportion of Investors in Industrial Estates 2012 by Approved Registered Capital

The Japanese remain the largest investors in Thailand with approximately 70% of the total, followed by East Asian countries with 7%. While Europe, North America and ASEAN have some share, other parts of the world have very limited manufacturing facilities here.

From January to December 2012, Japanese investors received promotion certificates from the BOI for a total a total investment value around THB348 billion from total 761 projects, representing around 70% of total foreign investment in 2012. Although many Japanese investors were affected by the floods in 2011, but they are still confidence in Thailand, so the investment value in 2012 from Japanese investors were more than in 2011 by around THB189 billion. In addition, the problem between China and Japan regarding the Diaoyu Island was affected to most of Japanese business in China were looking their new investment base outside China and Thailand is the most priority in ASEAN.

Source: Board of Investment and Colliers International Thailand Research

Land Prices, H2 2012

Source: Colliers International Thailand Research

The selling price of land in industrial estates or industrial parks is based on factors such as location, proximity to transport facilities, infrastructure and a supplier base Bangkok commands the highest land prices as it is a centre of transport which includes the sea ports and international airport.

Second and third are Chonburi province and Chachoeng Sao province, respectively. The wide variation of prices in Chonburi and Chachoeng Sao provinces is due to a number of industrial estates being located close to Bangkok while others, mostly pulp and paper manufacturers, is located further away from the capital. Provinces such as Prachinburi and Saraburi have much cheaper land prices due to their locations far from Bangkok or port facilities.

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The average price of the most of industrial estates in Eastern area and all locations in Thailand were expected to increase their sale price by around 5 – 10% in 2013. Besides, some industrial estates are planned to changed their policy from sale the land to rent to investors, due to the limited available land plots and many law & regulations as well as new town planning in some provinces were regulated their expansion and development plan.

INdustrial estate market REPORT | H2 2012 SUMMARY 2012 and forecast 2013 The Eastern Seaboard area is more popular after the floods and a lot of new investors have focused on this area. Many new industrial estates are planned for development in the area over the next few years; in addition, existing industrial estates are also expanding or are looking for new areas to support growing demand from Central Thailand and new investors.

Laws, regulations, new town planning in some provinces, especially environment impact assessment (EIA) and health impact assessment (HIA) were affected to all industrial estates, due to its regulated and control their new development plan or new expansion plan. However, all industrial estates were planned to be changed their policy to rent their land plots instead.

The Industrial Estate Authority of Thailand (IEAT) is planning to develop new industrial estates in the neighbouring provinces to support the ASEAN Economic Community (AEC) in 2015, especially in Kanchanaburi, Chiang Rai, Udon Thani, Tak and Nakorn Panom provinces. All industrial estates in the border provinces are scheduled to be completed in next few years. A lot of new investors are focusing on provinces along the border of Thailand, due to their need to export to neighbouring countries and take advantage of the additional incentives that will follow the AEC in 2015.

The increasing of minimum daily wage in 2012 was affected to all investors in Thailand. A lot of investors were planned to move their investment base to other country outside Thailand and affected to many Thai factories were produced the product for foreign investors, because of many foreign investors were canceled the order or postponed their new order, due to the production cost was increased from the past.

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INdustrial estate market REPORT | H2 2012 COLLIERS INTERNATIONAL THAILAND MANAGEMENT TEAM INDUSTRIAL SERVICES Narumon Rodsiravoraphat | Associate Director RETAIL SERVICES Asharawan Wachananont | Associate Director PROJECT SALES & MARKETING Monchai Orawongpaisan | Associate Director RESIDENTIAL SALES & LEASING Napaswan Chotephard | Manager RESEARCH Surachet Kongcheep | Senior Manager OFFICE SERVICES Nattawan Radomyos | Senior Manager ADVISORY SERVICES | HOSPITALITY Jean Marc Garret | Director ADVISORY SERVICES Napatr Tienchutima | Associate Director REAL ESTATE MANAGEMENT SERVICES Thanasit Tonsatcha | Associate Director INVESTMENT SERVICES Nukarn Suwatikul | Associate Director Wasan Rattanakijjanukul | Senior Manager

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