By Andrew Batt:
More than one quarter of factories that were flooded in last year’s floods have yet to restart operations, however Knight Frank Thailand remains upbeat about the future of the country’s industrial estates.
Marcus Burtenshaw, Directior of Commercial Agency, said: “Nine months have passed since the catastrophic floods struck the industrial estates, crippling global supply chains in various industries, having a major impact on property markets and the Thai economy at large. Most of the factories in the flood zone have already restarted their production, and whilst we have seen some number of factories permanently close and/or relocate, we do not foresee a totally bleak future for in the flood zone. Indeed, estates such as Nava Nakorn and Rojana are still recording land sales today. The future of course is still uncertain and much will depend on how Thailand copes with this year’s rainy season.
Burtenshaw explained that as of July 2012, some 74.6 percent, or 663 factories of damaged factories in industrial estates of Pathumthani and Ayutthaya, have restarted their operations.
Today the production index has returned to pre-flood levels, although there are still many manufacturers who have not yet fully recovered. Of the factories that have not yet restarted, 81 have indicated an intention to reopen. 51 of these are expected to be operational by Q3, 25 in Q4 2012, and five are expected to restart operations by Q1 2013. A total of 62 factories have completely shut down or relocated,however it is somewhat better news for the total of 7,893 factories outside of industrial estates in the flood zone where 97.16 percent have resumed operations.
Some factories rely on yet-to-be completed governmental protection measures, whilst others have taken the initiative to self-protect. The latter includes constructing flood walls surrounding the factory premises or purchasing flood barriers that can be rapidly deployed by truck and inflated with high pressure water.
Interestingly, other firms have acquired or are looking for additional production facilities in other locations in Thailand with a much lower risk of flooding, with the intention of either having one serve purely as a backup or of splitting production capacity between the two facilities. The locations that have proved most popular include those in Prachinburi, Chonburi, Chachoengsao, and Rayong provinces.
Demand for manufacturing property is broken down by the number and value of foreign direct investments in various sectors, such as agricultural products, services, chemicals and paper, and electronics. Thailand enjoyed the most growth in the number of projects from the services, chemicals & paper, and electric and electronics products sectors. It was found that, despite the devastating floods, or perhaps because of it, the value of foreign direct investment from January to June 2012 increased to 171 billion baht, or by 10.40 percent, compared to the same period last year.
According to Knight Frank Thailand Commercial Research, the total supply of SILPs in Q1 2012 reached 118,642 rai, representing an increase of 1.61 percent quarter-on-quarter, or 4.78 percent year-on-year. The total take up was 102,187 rai – an 86 percent take up rate.
Most of the new supply is mostly located along the Eastern Seaboard where industrial estates are expanding to cater to increased demand, as their popularity increased when firms sought high ground after the flood.
The factory rental market’s occupancy rate was 93.26 percent in Q1 2012, which reduced from 95.07 percent in the previous quarter. The total supply was 2,304,713 sqm, with the occupied space of 2,149,388 sqm.
The Eastern Seaboard commands the highest factory rental and occupancy rates in the country.
Firms flock here to seek out improved investment privileges, shorter logistics links to the port, and leverage the benefits of existing industry agglomerations.
Looking ahead Burtenshaw foresees the Eastern Seaboard’s popularity to go from strength to strength, but adds that locales such as Saraburi and Prachinburi could represent the greatest competition to estates in the flood zones, as they were unaffected by the deluge, offer land values at comparable rates and the competition for labour is less intense than it is on the Eastern Seaboard.
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