ENG

Renting Factories and Warehouses in Today's Economic Climate

27 September 2024

The economic climate in Thailand for 2024 is marked by a robust recovery following the global disruptions of recent years. While the World Bank has slightly lowered its growth forecast for 2024 to 2.4% due to weaker exports and public investment, it expects growth to rebound to 2.8% in 2025.

 

As the country emerges as a prominent player in Southeast Asia’s industrial landscape, factors such as increased foreign direct investment, the growth of the e-commerce sector, and a strategic focus on enhancing logistics and supply chain capabilities are reshaping the industrial real estate market. The Thai government’s supportive policies and initiatives aimed at boosting manufacturing and logistics capabilities further contribute to a favorable environment for businesses.

 

In this context, renting factories and warehouses has become increasingly relevant as companies seek to capitalize on Thailand’s strategic location. The dynamics of the rental market are influenced by demand, driven by both domestic and international businesses looking to establish operations in the region. This article delves into the current landscape of renting factories and warehouses in Thailand, with a keen focus on economic trends, rental statistics, and market forecasts impacting this sector.

 

Current Rental Rates for Factories and Warehouses in Thailand

The average asking rent for ready-built warehouses in Thailand saw marginal growth in early 2024, reaching 159.3 THB per square meter per month in the first quarter. This represents a 0.79% quarter-on-quarter increase, as reported by JLL. Other reports in 2023 indicate that rental rates for multiple-user factories are expected to rise by 4-6%, while warehouse rentals are projected to grow by 3-5% in 2024.While the overall market experienced this slight uptick, higher than average rates were observed in specific areas, indicating regional variations in demand and supply.

 

How Have Rental Rates Changed Over Time?

Historically, rental rates have shown resilience, with moderate increases of 2% observed over the last 8 years. The robust economic recovery and increased foreign direct investment have contributed to a more competitive rental market.

Regional rental rates differ slightly, with variations spanning from 100 to 161 THB per square meter. Here are current average rates:

  • Bangkok Metropolitan Region (BMR) and Eastern Economic Corridor (EEC): 161 THB per square meter per month
  • Central region: 147 THB per square meter per month
  • Other areas of Thailand: 100-107 THB per square meter per month

 

For a more in-depth look at Bangkok read our Bangkok Warehousing 2024 Article.

 

What Factors Influence Rental Rates?

Factors influencing rental rates include economic conditions, demand for logistics space, and the overall industrial growth within the region. For instance, the ongoing expansion of e-commerce and logistics sectors has driven demand, with e-commerce projected to grow 13.7% and logistics at a compound annual growth rate (CAGR) of 6.24–6.37% in 2024, thus affecting rental prices.

 

Occupancy Rates in Factories and Warehouses

The supply of general warehousing space in Thailand is forecast to increase at an average annual rate of 5.3%, but this is expected to lag behind demand growth, pushing occupancy rates to around 86-87% during 2024 and 2025. According to a recent report by Krungsri Research, players in the market have accelerated investments in both the expansion and upgrading of existing sites and the construction of new warehouses to accommodate this demand. This trend is particularly notable in the development of modern built-to-suit premises, which are designed to meet the requirements of automated inventory systems and minimize the risk of unleased properties.

 

Several key players are leading this expansion. Kerry Logistics (Thailand) is expanding its operations on the Bang Na-Trat road and upgrading its facilities in the Eastern Economic Corridor (EEC) to better handle the import needs of European and Chinese electronics. Charlie Top Logistics is constructing a 22,000 sq.m. site near Laem Chabang Port, expected to open in 2023. Frasers Property Industrial Thailand is also contributing significantly by expanding its built-to-suit facilities in Samut Prakan, with a new 11,000 sq.m. site designed according to LEED green-building standards. Similarly, WHA Corporation is increasing rental space at the WHA Mega Logistics Center in Samut Prakan. As a result of these expansions, the total supply of warehousing space grew by 8.1% year-on-year to 6.3 million sq.m. in 2022, and the occupancy rate rose from 84.6% in 2021 to 85.9% in 2022.

 

For Frasers Industrial, this broader market trend is reflected in their performance. As of 9MFY2024, the average occupancy rate for their industrial properties is 88%, a slight decrease from 89% in 2023. However, the total leasable area has increased 3.62 million square meters, highlighting a resilient market position amidst competitive pressures. This stability aligns with broader industry trends, where demand growth continues to outpace supply in key areas, supporting an overall positive outlook for occupancy rates in the coming years.

 

Overall, the Thai warehousing sector remains on a growth trajectory, driven by strategic investments and sustained demand, despite some fluctuations in occupancy rates due to increasing supply.

 

What Are the Implications of High Occupancy Rates?

High occupancy rates indicate strong demand for warehouse and factory spaces, which can have several implications for the market. First, increased demand often leads to greater competition among tenants, allowing landlords to raise rental prices, especially in high-potential areas like the BMR and the EEC. As occupancy rates approach 86-87% in 2024 and 2025, landlords are more likely to invest in property improvements, such as upgrading to modern, tech-enabled warehousing solutions. These investments not only enhance the market's appeal but also cater to tenants seeking greater efficiency and lower operational costs. Additionally, higher occupancy rates can prompt landlords to expand their existing facilities or develop new ones, further contributing to the overall growth of the industrial real estate sector.

 

How Does Occupancy Rate Affect Rental Agreements?

Occupancy rates play a crucial role in shaping the terms of rental agreements. When occupancy rates are high, as forecasted for 2024 and 2025, landlords gain leverage, allowing them to offer less favorable terms to tenants. This could include shorter lease durations, fewer concessions, or higher rent escalation clauses. Conversely, lower occupancy rates provide tenants with more negotiating power, potentially leading to longer lease terms, rent discounts, or more flexible conditions. Moreover, in a high-occupancy market, landlords may prioritize long-term contracts with stable tenants over short-term agreements, thereby securing steady income and reducing the risk of unleased properties. This trend is particularly evident in modern built-to-suit premises, where long-term leases are preferred to ensure a stable return on investment.


Future Projections for the Rental Market 

Thailand's industrial real estate market is projected to grow steadily through 2025, driven by infrastructure development, government incentives, and e-commerce expansion. Demand for general-purpose warehousing is expected to grow at an average rate of 5.6% annually, supported by the forecasted economic growth of 3.6% in 2024 and 3.4% in 2025. Supply will increase at a slower pace, leading to higher occupancy rates, projected to reach 86-87% by 2025. This growth will be bolstered by investments in both built-to-suit and ready-built facilities to meet dynamic market needs.

 

What Are the Key Drivers for Future Growth?

Key drivers include the sharp rebound in tourism, which will boost consumption and support growth in domestic manufacturing. The rise of e-commerce is driving demand for modern logistics and distribution facilities. Additionally, investments in smart warehousing technologies and government initiatives like the EEC are positioning Thailand as a critical logistics hub in Southeast Asia.

 

How Should Businesses Prepare for Market Changes?

Businesses should prepare for increasing competition and rising occupancy rates by adopting flexible strategies. Investing in tech-enabled warehousing solutions will help optimize operations and reduce costs. Given the projected growth in demand, companies should also consider locking in favorable long-term leases and exploring opportunities in high-potential areas like the EEC to capitalize on infrastructure improvements.

 

Summary

Thailand's economic outlook for 2024 indicates a competitive rental market for factories and warehouses, with stable or increasing occupancy rates and upward pressure on rental rates. Businesses planning to rent industrial space should assess market trends, regional variations, and their operational requirements to make strategic decisions.

 

Frasers Industrial can support businesses in navigating this dynamic landscape, offering a range of factory and warehouse solutions tailored to their needs. With an average occupancy rate of 85.8% in 9MFY2024 and substantial leasable area, Frasers Industrial is well-positioned to provide reliable and strategic industrial real estate options.

 

 

https://www.krungsri.com/en/research/industry/industry-outlook/logistics/warehouse-space/io/io-warehouse-2023-2025

https://www.statista.com/statistics/1272386/thailand-average-monthly-rent-of-finished-goods-warehouses/

https://thethaiger.com/thai-life/property/real-estate-market-trends-in-thailand-2024-to-2025

https://content.knightfrank.com/research/2769/documents/en/thailand-market-2023-2h-2023-11059.pdf

https://www.worldbank.org/en/news/press-release/2024/07/03/secondary-cities-vital-for-thailand-s-economy-as-world-bank-projects-2-4-growth-for-2024#:~:text=Gross%20domestic%20product%20is%20projected,investment%20early%20in%20the%20year.

https://research.jllapsites.com/appd-market-report/q1-2024-logistics-industrial-thailand/

Related Topics
All

Shared

View more in blog

27.09.2024

Renting Factories and Warehouses in Today's Economic Climate

Explore the benefits and challenges of renting factories and warehouses in today's fluctuating economy. Learn how businesses can adapt to current market trends, optimize operational costs, and secure flexible industrial spaces for growth.

26.09.2024

Thai's Rating of Energy and Environmental Sustainability for New Construction

B2.9/2 PLOT P25 PIN1

28.08.2024

Key Considerations for Short-Term vs. Long-Term Warehouse Rentals

Explore the key considerations when choosing between short-term and long-term warehouse rentals. Learn the benefits, costs, and factors to help you decide the best option for your business storage needs.

01.08.2024

Cross-Docking: Benefits and Implementation Strategies

Discover the advantages of cross-docking for your logistics operations. Learn how to reduce storage costs, improve delivery speeds, and streamline your supply chain.

06.06.2024

Thai's Rating of Energy and Environmental Sustainability for New Construction

AMN-M1.7 Plot G702/20 (Ready-built Factory

21.03.2024

Logistics and Connectivity: The Strategic Advantages of Chonburi’s Industrial Estates

Strategically nestled in the heart of Southeast Asia, Chonburi's industrial estates boast unparalleled logistics and connectivity. They're a magnet for businesses looking to tap into dynamic markets. With state-of-the-art infrastructure, these hubs are transforming the landscape of regional trade.

21.03.2024

Bangkok Warehousing 2024: Adapt to Evolving Market Needs

Bangkok's warehousing market is undergoing a transformation as dynamic as the city itself. In 2024, the landscape is defined by rapid technological advancements and shifting economic currents. Businesses are finding that staying ahead means adapting quickly to these changes.

21.03.2024

Sustainable Practices for Modern Warehouses

In today's eco-conscious market, sustainability isn't just a buzzword—it's a business imperative. Modern warehouses are at the forefront of this shift, adopting practices that reduce environmental impact while boosting efficiency. They're proving that going green can mean more than just saving the planet; it can save on costs, too.

14.02.2023

Everything You Need to Know About Getting a Factory License in Thailand

On October 27th, the Factory Act came into effect, creating adjustments to aid factories in becoming more comfortable and adaptable in the market. According to this new act, a factory is define as a building, place, or vehicle with at least 50 employees or machinery with a total power of 50 horsepower or more. This marks a major change from the 1992 Factory Act, which set the criteria for 5-20 horsepower and/or 7-20 employees.

13.12.2022

How Smart Warehouses are Using IoT Devices

The world is changing, and the internet of things is at the forefront of this change. Businesses of all types are beginning to adopt IoT (Internet of Things) technology in order to improve efficiency and bottom lines.

28.10.2022

5 Factors to consider when choosing a location to rent a Factory

There are several points to take into consideration when choosing a proper location to rent a factory in Thailand. These Factors are important for the supply chain and logistical processes of your business therefore the next time you are renting a factory, do proper research and evaluate the options you have. This will affect all aspects of your business from branding, employee workflow to your customers' satisfaction. However, in order to make an informed decision, this article will run through the main points to get the best out of your factory rental.

28.10.2022

Factory for rent in Chonburi – Pros & Cons

Chonburi is located in the north-eastern part of Thailand. This province, located just about 64km away from Jomtien beach and 60km from Pattaya beach, is known as one of the most popular destinations among tourists for its beautiful beaches, natural beauty, cultural heritage, and friendly locals. It is also a good location for living with a lot of greenery, clean air, and fresh water.

28.10.2022

Warehouse and Warehousing - what is the difference?

Warehouses are associated with storing goods. Many businesses use these facilities to store their products, such as raw materials, packing materials, components, or unfinished goods until they are ready to be shipped to the distributor or manufacturer where it turns into finished goods.

28.10.2022

Warehouse for Rent in Chonburi – Pros & Cons

Chonburi is located in the north-eastern part of Thailand. This province, located just about 64km away from Jomtien beach and 60km from Pattaya beach, is known as one of the most popular destinations among tourists for its beautiful beaches, natural beauty, cultural heritage, and friendly locals. It is also a good location for living with a lot of greenery, clean air, and fresh water.

01.08.2022

8 Tips When Looking for Warehouse Space

If you are a business owner looking for a new warehouse space, it is paramount that you know exactly what you need before starting your search. First, you must do plenty of research and put together a solid plan of action. That way, when you do start looking at prospective warehouses, you can save time by instantly recognising which units are unfit to accommodate you, and which units should immediately be added to your shortlist of potentials.

07.07.2022

Built-To-Suit Warehouses are on the Rise, why Purpose built Warehouses and Factories make sense for Businesses

As e-commerce demand continues to grow, built-to-suit warehouses are becoming more and more popular. But what is a built-to-suit warehouse and why are they so valuable for e-commerce retailers and logistics companies alike? In this article, we’ll tell you everything you need to know!

22.06.2022

A Guide to Cold Storage Warehousing

Cold storage and transportation is what makes it possible to send fresh foods and medicine all over the world without the risk of unnecessary storage. If you’ve ever wondered how your favourite ice creams gets delivered to your local shop – that’s how!

12.05.2022

How AI and Automation Are Impacting Warehousing in Thailand

The impact of AI in warehouse automation has been revolutionary as it is leveraged across multiple multiple applications such as robotics, computer vision, and language processing tools to streamline warehouse operations. In this article, we’re going to look at how AI and automation are impacting warehousing in Thailand, and what it means for the future

07.04.2022

Buying or Renting a Factory – Which is best?

There are a number of important factors to consider when you are trying to decide whether buying or renting a factory is the best move for your business. In this article we’re going to explore these factors, ask some important questions, and try to determine which would be the best option for you. Read on to find out more.

08.03.2022

Why Warehouses in Asia are on the rise in 2022

Warehouses are in high-demand all across the world at the moment and in 2022 we’re only going to see that popularity rise even higher. But why is that? What’s with all of the hype and desire for warehouses right now? In essence, businesses (especially retailers) are running out of room to hold all of the items that we are ordering online.

03.02.2022

Advantages of Renting a Factory or a Warehouse

When business owners and entrepreneurs look to expanding their business operations, one of the biggest challenges is finding an appropriate factory or warehouse that can support and encourage future success.

14.10.2021

Good Manufacturing Practice (GMP) – What it is, what it covers and what the benefit are

In this article, we are going to explore GMP (good manufacturing practice), and what benefits it can bring to your business. As with any industry, in order to experience the highest levels of success, one must adopt the best practices in everything that you do, whether it be manufacturing, customer service, or hospitality. By gaining a thorough understanding of these ‘good practices’, you can optimize your business to function at peak performance, increase profits, and bolster your brand reputation. Let’s get stuck in!

14.10.2021

Supply Chain Challenges and how a Warehouse can take your business Forwards

There have always been challenges in the supply chain, and what with the COVID-19 pandemic, many of these issues have been exacerbated. In any case, as business owners are faced with new challenges it encourages innovation—which leads to some surprising ways to overcome said challenges. One thing that can really help drive your business forward and combat a number of supply chain issues is by investing in the appropriate warehousing. But, before we get into that, let’s look at some of the biggest problems faced and what might be done to combat them.

01.09.2021

Factory Rentals in Thailand - All you need to know

Are you looking for factory rentals in Thailand? If so, then you may be feeling a little overwhelmed at the task; trying to find the ideal premises in a strategic location, and for the right price. But don't panic! It's not as difficult as you might think, particularly when you do your research.

11.08.2021

Warehouses in Thailand – What you need to know.

Whether you are a new business owner looking to expand, or you are long-established and simply need to upgrade, having a warehouse comes with a great number of benefits. As someone who is unfamiliar with warehouses or is perhaps looking at them for the first time, then you’ll need to plan your approach with careful consideration.

02.08.2021

Warehouse Security and our approach to Dangerous Goods Warehousing

A large explosion and fire destroyed the Ming Dih Chemical factory compound that had been producing plastic foam and pellets in Tambon, Rachatewa, causing extensive damage to the surrounding communities, earlier this month in July 2021.