second half 2011 | INDUSTRIAL
thailand
Industrial Estate Market REPORT Industrial Estate Market highlights Seven industrial estates in the central part of Thailand were flooded and will need more time for recovery before they can restart operations. There was a nominal increase of nearly 0.1% in the Serviced Industrial Land Plot (SILP) area in H2 2011. Take-up in every zone increased from the previous half year.
market indicators H1 2011 - H2 2011 Supply demand PRICE occupancy
Conversion Table 1 rai = 1,600 sq m 1 hectare = 6.25 rai 1 acre = 2.53 rai 1 rai = 400 sq wah
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The Eastern Seaboard dominated industrial estate activity, especially after the flood.
industrial estate Market REPORT | SECOND HALF 2011 Industrial Zoning Colliers International Thailand has split the industrial estate market in Thailand into five main zones. These are: Eastern Seaboard area – This is the industrial powerhouse due to its location near Thailand’s main container port, Laem Chabang and its proximity to Bangkok. Further growth has come about due to suppliers clustering around large manufacturers. North Eastern area – The remoteness of this area and poor transport means that the area has a minor share of industrial activity. The border with Cambodia and Laos (leading to Vietnam) could provide some potential for the future.
due to its remote location, its predominantly agricultural environment, and its unfavourable topography. Its proximity to China has potential as trade between the two countries increases. Central Area – Another key industrial area due to its proximity to Bangkok, keen for distribution center. Southern Seaboard area – An underdeveloped industrial area catering mainly to the Malaysian market with halal food produce as well as heavy industrial projects based on oil and frozen seafood product. This report is concerned predominantly with SILPs but it must be stated that a considerable number of stand-alone factories exist outside the industrial estates.
Northern area – Limited industrial activity has taken place here so far
Supply Historical Supply SILPs
Source: Colliers International Thailand Research
Approximately 6,200 rai were added in 2011 with the total supply of SILPs increasing to about 125,000 rai. This increase occurred in the Central and the dominant Eastern Seaboard areas. The year 2010 still
represented the greatest addition of new supply since the Asian financial crisis.
Supply by Zone
The total supply in 2011 was around 125,000 rai. Supply in the Eastern Seaboard area dominates the Thai industrial estate market, accounting for nearly two-thirds of the total supply. The Eastern Seaboard and Central areas account for more than 90% of the total supply. Most industrial estates in the Central area were damaged by the floods in the fourth quarter of 2011 and this is the main concern for new industrial estate development and the expansion of the existing industrial estates. Most industrial estates planned for development in 2012 will be more focused on non-flood areas, such as the North-eastern and Eastern Seaboard areas.
Source: Industrial Estate Authority of Thailand, Board of Investment (BOI) and Colliers International Thailand Research
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industrial estate Market REPORT | SECOND HALF 2011 New Supply of Industrial Land Plots by Location, H2 2011
Source: Industrial Estate Authority of Thailand, Board of Investment (BOI) and Colliers International Thailand Research
The new supply added in H2 2011 was nearly 5,400 rai in two zones, 76% in the Eastern Seaboard area and 24% in the North-eastern area.
All of the new supply came from the expansion of five existing industrial estates.
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industrial estate Market REPORT | SECOND HALF 2011
Future Supply Scheduled to be Completed in the Future
Source: Colliers International Thailand Research
A total area of around 75,900 rai, worth more than THB70 billion, has received approval from the IEAT and/or Board of Investment to be developed as SILPs. This land will be developed gradually in phases but it is not known when it will be available for sale or rent. The Southern Seaboard area shows the largest expected increase with a total of more than 54,000 rai followed by the Eastern Seaboard with approximately 16,000 rai.
Serviced Industrial Estate by TCC PD13 Co. Ltd, a subsidiary company of TCC group, which has a total area of around 13,335 rai. Unlike other industrial estates these cater primarily to hospitality, educational, leisure and residential purposes and are also in the northernmost part of the southern area and within close proximity to Bangkok. There are also plans for future industrial areas and a seaport in the south of the country.
Approximately 54,000 rai in the Southern Seaboard area is comprised of 35,000 rai at the Thai Diamond City Service Industrial Estate and another
DEMAND Take up rate, during 2008 – 2011
Source: Colliers International Thailand Research
The take-up rate in every zone increased in 2011, even in the floodaffected Central area, due to the increase in demand in the first half of
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the year. Many investors from flooded areas are planning to move to the Eastern Seaboard Area or other locations in 2012.
industrial estate Market REPORT | SECOND HALF 2011 Demand Drivers Foreign Direct Investment (FDI) by Year
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 protest in 2010. The level has picked up but still remains weak compared to pre-crisis levels.
FDI by selected countries
Source: Bank of Thailand and Colliers International Thailand Research
The Japanese remain by far the dominant foreign nation in terms of investment into Thailand. 2011 levels of investment by the Japanese have now returned to levels previously seen in 2007 at over THB 150 million having dipped considerably in 2010 as a result of the political
problems. Investment from Singapore and the USA has increased slightly over the past year whilst Hong Kong and the Netherlands has reduced somewhat.
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industrial estate Market REPORT | SECOND HALF 2011 Investment by Board of Investment (BOI) zone BOI Certificates issued H2 2011 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 provided for investors with the poorer zones being offered 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 such as Chonburi and Rayong, and 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 Zone 3. However, in 2H 2011 investment decreased sharply, with Zone 1 and Zone 3, falling around 73% and 72% from 1H 2011.
Manufacturing Production Index by Month
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 stable for the past year and a half. A small dip occurred after the
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Japanese earthquakes and tsunami but had recovered before the floods struck in the final part of 2011.
industrial estate Market REPORT | SECOND HALF 2011
New Factories Permitted from January 2010 – November 2011
Source : Department of Industrial Works and Colliers International Thailand Research
The growth in demand for new factories has remained stable over the course of the past two years. What this seems to indicate is that the rebound in industrial growth has come about from existing businesses rather than the entry of new ones into the market. Established players know the Thailand market well and are relatively unfazed by the trials and tribulations of Thai politics. Also industrial decision-making is longterm, involving the slow and solid build-up of a supplier base, plus a
knowledgeable workforce therefore investors will not pull out due to sporadic problems. Many countries have their ups and downs and longterm investors simply ride these out. It is also the case that negative events often have very little direct impact on the manufacturing process and only affect overall sentiment. That said, new entrants are likely to be far more cautious in making long-term decisions during a period of uncertainty.
Proportion of Investors in Industrial Estates 2H 2011 by Approved Registered Capital
Source : Industrial Estate Authority of Thailand and Colliers International Thailand Research
The Japanese remain the largest investors in Thailand with approximately 50% of the total invested, followed by East Asia with 13%. While European and ASEAN have some share, other parts of the world have very limited manufacturing facilities here.
From January to November 2011, Japanese investors received promotion certificates for a total of 333 projects from the BOI with a total value of THB102 billion, representing around 77.8% of total foreign investment for this year.
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industrial estate Market REPORT | SECOND HALF 2011 Land Prices BOI Certificates issued H1 2011 by investment
Source: Colliers International Thailand Research
The land selling price of industrial estates or industrial parks is based on factors such as location, proximity to transport facilities, infrastructure and a supplier base. The concept of clusters is an important factor for locating a factory. 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
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located close to Bangkok while others, mostly pulp and paper manufacturers are 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. However, after the floods in the north central areas of Thailand land prices rose in the eastern industrial estates by around THB500,000 per rai.
industrial estate Market REPORT | SECOND HALF 2011 Flood-Affected Industrial Estates Ayutthaya Province Hi-Tech Industrial Estate The industrial estate shut down for two months but partially reopened in mid-December with only 10 of the 140 factories back in operation. The estate is due to be fully restored around March 2012. Hi-Tech is spending over THB100 million to restore utilities and other services. It also plans a THB330 million programme to build a new, nearly 11 km-long dyke that is 5.4 metres high as flooding reached nearly 5 metres at its peak.
Rojana Industrial Park - Ayutthaya In the second week of October the dykes protecting the estate were overwhelmed and the whole of the industrial estate was inundated, affecting all 198 factories. The focus of the estate is automotive parts and electronics companies. It is understood that the operator will invest THB1.7 billion to construct permanent barriers with 7.5 meter height around the park’s 67 km perimeter. The estate plans on constructing a local road parallel to the Asia Highway which will act as a run-off during flooding conditions.
Bangpa-In Industrial Estate Overflow broke through floodwalls in the estate in mid-October and inundated the whole of the estate. Most of the water was drained by the middle of November with full power being reinstated on 26 November. Clean up of the estate took place until early December. The estate owners are to invest about THB500 million for the floodprotection system and THB200 million to repair and rebuild infrastructure. The height of the dyke surrounding the estate will be increased from 4 to 5 metres, while the underground floodwall will be at least a metre deep.
Saha Rattana Nakorn Industrial Estate This was the first industrial estate in Ayutthaya to be hit by the floods on 4 October. Saha Rattana Nakorn Company is now under debt restructuring and there are concerns regarding financing of flood protection measures.
Nava Nakorn Industrial Promotion Zone - Pathum Thani On 18th October workers were forced to evacuate the estate and the whole area was inundated affecting over 200 factories. A future 6.5metre high and 22-km long barrier has been proposed requiring an investment of around THB500 - 600 million.
Other affected Industrial Estates Although seven industrial estates were shut down due to flooding, others appeared to have had a close call. Bangkok’s Bang Chan and Lat Krabang industrial estates were in danger of inundation when waters rose outside their protective barriers but in both cases the estates managed to stay operational with occupiers taking precautions by raising machinery above the ground. Around 30 pumps expelled 500,000 cubic metres of water per day at the Bang Chan estate, with the assistance of 12 boats.
Forecast The flooding badly affected the Central area, especially Ayutthaya and Pathumthani provinces, with six industrial estates/ parks and one factory land under water and approximately 890 factories closed down. Two months after these factories dried out nearly everything is back to normal, with the government taking measures to restore confidence and to convince both local and foreign investors that such disasters will not repeat themselves. In 2012 the main concern for all investors is a long-term flood protection system from the government and a campaign or incentives for flood victims. In addition, the government departments including the Board of Investment and Industrial Estate Authority of Thailand and related organisations must try to restore their image following the damage by the floods. Many companies directly affected by the floods shifted production to other facilities. Aopico Hitech Plc, supplier of car parts to major automobile manufacturers shifted production from Ayutthaya to Rayong and Chonburi. Canon Hitech moved production to a plant in Nakhon Ratchasima as well as to Vietnam and it is unknown if production will move back to Ayutthaya. Amata, which has industrial estates in Rayong and Chonburi has claimed that a number of companies are planning to relocate to their industrial estates from flood-affected areas.
Factory Land Industrial Estate The industrial estate was flooded in the middle of October and some resumed operations at the end of November. It is home to readymade factories for small and medium-sized enterprises (SMEs) which can reopen fairly easily, as seen at Ayutthaya’s Factory Land Industrial Estate where most plants had already resumed operations by the end of 2011.
Pathum Thani Province Bangkadi Industrial Park This was the last estate to be flooded at the end of October. The park is planning to build an 8 km permanent floodwall around its park at a cost of THB350 million. The new walls will be 4.5 - 5.5 metres high compared to the previous 3 metre clay walls that were overwhelmed by the flood water.
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