Logistic Market H2 2023

Highlights

Thailand's logistics property market showed signs of a slowdown in its growth trajectory during the second half of 2023, with 3PL and e-commerce sectors scaling back to align their operations with demand outlooks. External factors such as the Red Sea conflict and other geopolitical tensions raise concerns for the global supply chain, and the magnitude of their impact on Thailand's logistics activities will likely be observed in 2024.

Economic Overview

The Office of the National Economic and Social Development Council (NESDC) announced the 2023 GDP growth of 1.9%, citing weakened public investment and spending in the latter half of the year.

Private consumption remains a significant driver of the Thai economy, with the service sector experiencing notable expansion, evidenced by growth exceeding 15% YoY. In contrast, investment has decelerated, with an increase of 1.3% YoY, attributed largely to a decrease in public investment. In addition, public spending has also seen a downturn, declining by 3.1% YoY, primarily due to delays in disbursing the 2024 fiscal budget. In terms of international trade, Thailand has managed to maintain a positive trade balance. This is shown in a 1.7% decrease YoY in exports of goods and services, which offset a greater decline of 3.1% YoY in imports.

Headline inflation in Thailand turned negative for four consecutive months, settling at an annual average of 1.3%, which aligns with the central bank's policy target of 1-3%. Amid these conditions, the Thai policy rate has been maintained at 2.5%, reflecting concerns over inflation risks that could arise in the absence of government interventions such as electricity bill or diesel subsidies. These concerns are compounded by the recent decline in Thai Baht and the context of the US Federal Reserve maintaining its key rate between 5.25-5.50%. Looking forward to 2024, NESDC forecasts the Thai economy to grow by 2.7%, with tourism and private consumption expected to be the major drivers of growth.

Looking at the indicators related to logistics, statistics from the Office of Industrial Economics (OIE) indicate that the production index experienced a decline from 94 in June 2023 to 88 in December 2023. In the meantime, the finished goods inventory index also reduced from 139 to 127. This combination of reduced production and inventory levels indicated that while consumption has recently been strong, future projections appear less optimistic.

Supply

Current Supply

The total supply of ready-built warehouses reached 5.70 million sq m, an increase of 169,000 sq m in warehouse space from the previous half-year. This addition represented growth of 3.1% HoH and 6.3% YoY. The new supply included KR Warehouse - Beung sub-district and Alpha Laemchabang in Chonburi, Fraser Bangna 2 in Chachoengsao, ESR Asia Suvarnabhumi in Samut Prakan, and Alpha Rangsit – Phaholyothin KM. 33 in Pathum Thani. The addition of supply also came from the expansion of existing projects like KR Warehouse – Bowin in Chonburi and RBF’s Buildwell in Pathum Thani.

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