Industrial property poised for success
Pandemic feeds demand for supply chain shifts and facilities to serve e-commerce
As the effects of Covid-19 are felt around the world, different real estate sectors are being affected in various ways. However, parts of the industrial sector have seen less impact in Thailand compared with other sectors.
The outbreak, together with ongoing US-China trade friction, has increased the interest of China-based companies in relocating. Companies are also refocusing their global supply chains to reduce their manufacturing risk by not being too reliant on a single country.
Thailand's geographic location gives it an important competitive advantage as an industrial hub for Asean. The expansion and success of the Eastern Economic Corridor (EEC) and its related infrastructure developments will be the keys to securing the country's place in a highly competitive game.
Connectivity is also a key to logistics. The Thai government is making progress with its various major infrastructure projects to secure a strong foundation for future growth, including double-track rail lines and a high-speed rail line to link three airports in the capital region, and by increasing airport logistics capacity.
Covid-19 is set to accelerate the broader adoption of new technology to overcome skilled labour shortages in the country. These include robotics and automation in many factories, as well as 5G technology in the manufacturing sector in the near future.
The pandemic has also opened a new door for Thailand to advance in medical device manufacturing, such as single-use and durable medical devices, and re-agents and test kits. For years, Thailand has been the top exporter of medical devices among Asean countries.
As there has been a sudden increase in global demand for medical equipment, the government is seizing the opportunity to attract foreign investors seeking to expand their manufacturing bases in this up-and-coming industry by offering many privileges. These go hand-in-hand with the EECmd initiative -- an EEC development plan devoted to advancing the medical industry by promoting R&D in the medical sector.
Many logistics providers, meanwhile, have seen unprecedented demand as consumers adapt further to the digital economy and online shopping to reduce the health risk of going out to stores.
The e-commerce and logistics sector in Thailand will continue to grow even after the pandemic has been contained, as locals have become familiar with online platforms, following the global trend.
In the first quarter of 2020, modern logistics property supply in Bangkok grew by 6.8% year-on-year, followed by 6.7% growth in demand, supported by resilient e-commerce demand and a surge in last-mile delivery. Moreover, many developers have received more inquiries about food, cold storage and data centre facilities.
While travel restrictions hindering inspections and contract signings, CBRE believes investment should recover when restrictions are eased, permitting foreign investors to enter Thailand.
Chonthida Asavahame is an analyst with Research and Consulting, CBRE Thailand. She can be reached at email@example.com