Bangkok to close 2023 with over 5 million sqm of prime warehouse stock

Expect a higher vacancy rate as a result.

In 2023, JLL revealed in a report that parts of Bangkok Free Trade Zone 3, 4, and 5 will be completed, along with the rest of the TIP 9 Industrial Project. 

This is expected to add 290,000 sqm of supply to the market by the end of 2023, which will bring the total prime grade warehouse stock to 5,190,000 sqm. The vacancy rate is expected to increase as a result.

Here’s more from JLL:

In the near future, the average rent is expected to drop due to the additional supply. However, with the new supply spread across Samut Prakan, which is highly sought-after, we do not expect a significant drop in the average rent.

Strong demand continues in the Northern and Eastern Vicinity

Net absorption in 1Q23 was at 59,600 sqm, an improvement from 4Q22. E-Commerce and 3PL sectors have continued to lead the demand side of the logistics market. The opening of the Shopee Sorting Center in Frasers Property Logistics Park Wangnoi 2 demonstrated the general interest in the Northern Vicinity.

Average prime-grade warehouse rent rose to THB 161.4 per sqm per month in 1Q23. This increase was attributed to the rent of properties in Samut Prakan province, where the demand for warehouse space is high due to its proximity to Bangkok.

Vacancy rises as new supply enters the market

New warehouse supply of 200,500 sqm was added to the market in 1Q23. This included the TIP 9 Industrial Project in Samut Prakan, which launched 108,600 sqm of ready-built warehouse. Meanwhile, Bangkok Free Trade Zone 5 (Phase 1) in Wangnoi, Ayutthaya, and the Shopee Sorting Center at Frasers Property Logistics Park Wangnoi 2 were completed, delivering 18,900 sqm and 73,000 sqm, respectively.

Due to the additional supply in the Eastern and Northern Vicinity submarkets, the vacancy rate rose to 10.3% in 1Q23, a 2.6% increase q-o-q.

Market yield compresses with the low-risk, built-to-suit approach

Capital value recorded at THB 31,754 per sqm, a 2.2% increase when compared to 4Q22. This was due to the increasing land price, which is partly caused by the demand for landed housing competing for land in the same area as logistics facilities.

Market yield dropped slightly q-o-q to 6.1% in 1Q23. Despite the rent increase recorded in the period, capital values outpaced rents, resulting in yield compression. This is to be expected with the maturity of the market, where developers have opted for a lower-risk, built-to-suit approach.

Note: Thailand Logistics & Industrial refers to the Greater Bangkok prime logistics market.