New supply of warehouse space is expected to fall as Thai exports experience a downturn from the continued global slowdown, according to property consultant Knight Frank Thailand.
Marcus Burtenshaw, executive director and head of the commercial agency, said some rental warehouse developers have postponed their expansion on the new logistics parks.
However, occupancy rate trends to be stable as net take-up increases at the same rate as the influx of new supply.
Rental rate is forecast to remain constant due to the balance of new supply and new demand, putting pressure on price competition and preventing a price rise.
In addition, progress on infrastructure, including the Laem Chabang port expansion, and the road and rail network development, is still a key positive factor that drives private investment and logistics space demand.
New supply needs to be constrained in areas of falling occupancy. Despite this, the underlying fundamentals that originally established each of the major strategic distribution locations are the same.
Demand for warehousing space continues to grow, as e-commerce begins to assume an even bigger role in the retail landscape in Thailand.
According to the company's research, total warehouse supply at the end of the first half of 2016 was 3.73 million square metres, an increase of 4.1% from the same period last year.
The latest peak in addition of supply was still from 2014 when the country's largest developer completed its three largest projects. Since then, the market saw relatively incremental increases in supply to cope with a slowing growth in demand.
For the remainder of 2016 to 2017, approximately 300,000 sq m of warehouse supply is expected to enter the market. Of this space, up to 250,000 sq m will be in Samut Prakan as the location offers a healthy level of demand and high levels of occupancy.
Total occupied space for the period was 2.9 million sq m or 78%, an 8.7% increase. Both supply and occupied space have been increasing at a similar rate, keeping an occupancy level relatively stable around 77.5 to 78.5%.
Warehouse occupancy rate as of the first half of 2016 was 78.0%, a small jump of 0.5% from last year's figure. The Eastern Seaboard saw the highest jump in occupancy whereas Greater Bangkok enjoyed the highest warehouse occupancy rate.
Pathum Thani and Ayutthaya still witnessed a continued reduction in occupancy rates since the great floods in 2011. The situation was made worse by the addition of new supply.
Warehouse rental rates remained relatively stagnant. As of the first half of 2016, the average warehouse rental rate was 156.9 baht per sq m per month.
Highest growth was seen in the Eastern Seaboard with a 0.5% increase from 148.9 baht to 149.6 per sq m per month.
Bangkok maintained its position as the most expensive area along with Pathum Thani, with the highest asking rent of 185 baht per sq m per month. Khon Kaen had the lowest asking price of 110 baht.
The current monthly rental rate was at maximum of 185 baht per sq m in Bangkok and Pathum Thani, followed by a maximum of 180 baht in Samut Prakan, Chonburi and Chachoengsao.
Warehouses command variable rents, depending on location, design, conditions and the age of the building. Modern logistics parks usually provide docks, raised floors, a floor loading capacity of up to 3 tonnes per sq m and ceiling heights of 10 m.
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