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Demand Surges in Modern Logistics Properties

August 07, 2019
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Growing e-commerce following the global trend together with the relocation of China-based manufacturing companies have significantly increased demand for Modern Logistics Properties (MLPs) in Thailand. The first quarter of 2019 has seen a 16% increase in net absorption compared to the previous year. This net absorption in Q1 2019 alone was more than half of the total new absorption of 2018. This has driven the vacancy rate of MLPs in Thailand to the lowest point since 2013.

Thailand Post, Kerry Express, DHL, and SCG Express have been key players in the Thailand market for many years. Now, contenders like Best Express and Flash Express, both of whom have strong backing from Alibaba, and Lalamove, who has partnered with LINE since 2016, are catching up on the market share. The expansion of existing companies and the emergence of new companies in the Thailand logistics market are good indicators of the future of both MLPs and the retail market.

However, not all indicators are pointing up. Vacancy rate in Ready-Built Factories (RBFs) is still high at 28% while Foreign Direct Investment (FDI) into manufacturing sectors decreased by 26% compared to the previous year. The strong Thai baht which has continued to appreciate since the beginning of the year impacted foreign investments to Thailand across all sectors. An appreciation of 12% against the Chinese yuan within a year and the six-year high against the US dollar made investing in Thailand more expensive and caused a decline in the exports of goods and services.

“Chinese manufacturing companies have been investigating the setting up of manufacturing facilities outside of China to avoid the tariffs, and international companies who have manufacturing plants in China are doing the same. We have seen an increase in enquiries, but many of them are closely assessing the US-China trade war situation before making a final decision.” said Adam Bell, Associate Director of Advisory and Transaction Services - Industrial and Logistics, CBRE Thailand.

CBRE believes the overall picture of industrial properties including Serviced Industrial Land Plots (SILPs) and Ready-Built Factories (RBFs) in Thailand should improve once the progress of EEC infrastructure developments is more visible and the Thai baht depreciates.

An article written by Rathawat Kuvijitrsuwan, Associate Director at Research and Consulting, CBRE Thailand for Bangkok Post dated 7 August 2019.
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