Thailand is seeing a notable rise in warehouse construction due to the availability of vacant land. Local developers are taking advantage of designated areas for warehouses, transportation, and industrial zones by constructing new facilities. This proactive development has resulted in a consistent annual increase in warehouse supply of about 10-20%, sometimes surpassing market demand.
A number of these developers already own large pieces of land, which enables them to consistently increase their warehouse options without incurring substantial initial land acquisition expenses. This has led to a rapidly expanding inventory of warehouse spaces, ensuring that the market remains well-supplied and competitive.
For foreign investors, this abundance presents both opportunities and challenges. While there’s a wide selection of properties to choose from, the sheer volume of available space means that rental prices have remained relatively stable, affecting potential rental yields.
Stable demand post-2011 floods and COVID-19 pandemic
The 2011 floods in Thailand caused a major change in industrial activities, with many businesses moving from central regions like Ayutthaya to the eastern parts of the country. Although warehouse operations remained in the central areas, a lot of manufacturing activities decreased. This change resulted in a stabilization of warehouse rental prices in those areas because there was not enough demand to increase prices.
During the COVID-19 pandemic, the rise in online shopping led to a greater need for logistics and warehouse facilities. Fortunately, new warehouses were quickly built to meet this demand, which helped to keep rental prices steady despite the increased e-commerce activity.
For investors, this means that although the demand for warehouse space is strong, the corresponding increase in supply has prevented significant rental price growth. The market is in a delicate balance of supply and demand.
Post-pandemic competition sparks price wars
The post-COVID-19 landscape has witnessed an influx of new players entering Thailand’s logistics and industrial sectors, intensifying competition and leading to price wars among warehouse providers. The increased participation of investors and developers has resulted in a saturated market.
The competitive pressures in the market have helped to keep rental costs in check. Warehouse operators are now offering more attractive rates and incentives to secure tenants. This is good news for businesses looking to lease space, but poses a challenge for investors seeking higher rental returns.
When investing in Thai warehouses, it’s important to consider the increased competition and its potential impact on rental income.
Rise of modern automated warehouses challenges traditional spaces
The modern automated warehouses are transforming Thailand’s storage and logistics industry by offering increased efficiency and reduced operational costs, making them the preferred choice for many businesses due to the latest technology they are equipped with.
The rise of high-tech warehouses is posing a challenge for traditional warehouses. Experts forecast that rental prices for traditional warehouses may stay the same for the next 3-5 years. Without the advanced features of automated facilities, traditional spaces may not be able to command higher rental rates.
Investors interested in warehouse properties should carefully consider the type of facility. Investing in modern, automated warehouses may offer better long-term returns compared to traditional ones.
Combined factors keep rental prices stable, which might have implications for investors
The combination of ample land availability, growing warehouse supply, steady demand, fierce competition, and the emergence of automated warehouses has led to relatively stable warehouse rental prices in Thailand over the last ten years. While this stability provides predictability, it also suggests that substantial rental price increases are unlikely in the near to medium term.
For foreign investors, this offers a market with consistent yet moderate returns. Success hinges on choosing the right property type and location. Warehouses with modern technology in high-demand areas could provide superior investment opportunities.
It is crucial to stay updated on market trends and technological advancements in the industry. As automation becomes more prevalent, it will be essential to invest in facilities that can adapt to these changes.
