Balancing digital & physical logistics spaces in Thailand

The Digital Age is defined by breaking down the boundaries between digital and physical space. The emergence of the Digital Age in logistics real estate has witnessed the shift of demand drivers towards ‘Digital Space’ – the physical space required to operate digital services such as e-commerce, data storage and cloud processing.

E-commerce is one of the largest and fastest-growing demand drivers for Digital Space. The sector has transformed the definition of retail, especially for warehouses and logistics. E-commerce in Thailand is expected to grow more than 10 times between 2015 and 2025, with a 10-year CAGR of 29%. By 2025, it is likely to account for 7% to 8% of the retail market.

Data Centres are crucial for the process and storage of data. Of late, they have witnessed a rapid increase in demand for both owner-operator (enterprise data centres) and shared spaces (colocation, managed services and cloud data centres). Growth in the South-East Asia is predominantly driven by international companies relocating their headquarters in Asia to benefit from the region’s low cost of entry, plentiful access to submarine optical-fibre communications cables and the region’s positive long-term demand growth projections.

The warehouse and logistics sector has been a major beneficiary of e-commerce’s emergence, with increasing demand driven by the expanding requirement for ‘last-mile delivery’ logistics facilities and larger regional warehouses for distribution and/or sorting centres. Developers have met this demand by introducing a large amount of space to the market consistently over the past four years, with 1H21 data reporting a 9.4% y-o-y growth in supply. The future development pipeline has numerous new warehouse and logistics developments scheduled to complete over the next few years, which will help satisfy the growing demand.

Figure 1: Historical market-wide cumulative Prime Grade Supply (2015-1H21)

Source: JLL Research, as of 1H21

Bangkok is a large demand source, but suitable development land is scarce and expensive, resulting in minimal new supply. JLL witnesses the city’s periphery and neighbouring provinces driving supply growth. These areas enjoy substantially less expensive land but benefit from convenient access to the city centre. Therefore, they experience the highest growth in both supply and demand for Digital Space.

In Bangkok, warehouse demand has been high in the below areas:

• Eastern Vicinity, an area on the outskirts of Bangkok, which provides access to the city centre
• Eastern Economic Corridor (EEC), an incentivised special development zone with Thailand’s largest seaports
• Northern Vicinity of Bangkok towards Phra Nakhon Si Ayutthaya, the gateway to the northern region of Thailand

Figure 2: Warehouse transactions since 2012

Source: JLL Research, as of 1H21

As the Digital Age reaches maturity, demand for Digital Space in Thailand will expand, and developers will continue to provide more tailored options. This will continue to provide opportunities to those innovators who can best synergise digital and physical space.