Thailand set to gain from supply chain shift, says JLL expert

Thailand is poised to benefit significantly from shifting supply chains over the next decade, according to real estate services firm Jones Lang LaSalle (JLL). The firm suggests that manufacturing and production locations are set to diversify across Thailand, Southeast Asia and India, potentially providing Thailand with considerable investment opportunities. However, companies are advised to remain flexible in terms of location and funding to manage supply chain volatility effectively.

Industries have started exploring options beyond China for their manufacturing bases as part of the 'China+1' strategy. This trend is aimed at mitigating supply chain disruptions by reducing over-reliance on a single country. Michael Glancy, Country Head of JLL (Thailand), stated: "Thailand has emerged as a prime investment destination in the supply chain reformation from China, garnering substantial investment across key industrial clusters, particularly in the electrical and electronics as well as electric vehicle sectors. This comes on the heels of a robust 2023, during which Thailand achieved its highest industrial land sales in the past 17 years."

Glancy also underscored the importance of government policies and competitive incentives in attracting foreign direct investment in targeted S-Curve industries. "Thailand's proactive measures, alongside its favourable business climate and skilled workforce, have played a key role in sustaining the current momentum throughout 2024," he noted.

The relocation of manufacturing bases has seen significant interest from top-tier international investors and manufacturers. Krit Pimhataivoot, Head of Capital Markets at JLL (Thailand), commented: "As the interest in Thailand's manufacturing sector continues to grow, we have seen a strong influx of inquiries from top-tier international investors and manufacturers. They recognise Thailand as a prime location for their production base, thanks to its strategic geographical position, well-developed infrastructure and utility systems, and skilled workforce. At JLL, we are committed to providing our clients with comprehensive market intelligence to facilitate their decision-making process when it comes to site selection and land acquisition."

Michael Ignatiadis, Head of Manufacturing Strategy for Asia Pacific at JLL, emphasised the need for companies to adopt a flexible approach: "Diversification within supply chains is a natural step for companies involved in manufacturing within the wider economic lifecycle of this region. We see Southeast Asia and India representing a natural complement to the existing production strength of China, but feel that for companies to respond quickly to supply chain shifts, they need to adopt a flexible mindset towards land selection and funding options."

According to various sources, rising costs in China over the past decade have been the primary catalyst for this shift towards diversification. Land prices in China have increased significantly, sometimes reaching up to twice the cost compared to some countries in Southeast Asia and India. This, coupled with higher wages and material costs, has prompted companies to look for alternative locations for their manufacturing bases.

JLL estimates that while China still holds the largest share of manufacturing foreign direct investment (FDI) in the region, the gap is narrowing. The key factors contributing to a factory's long-term success, including skilled labour, infrastructure, environmental regulations, proximity to suppliers and customers, and political stability, are areas where other countries in the region are also proving competitive. JLL recommends a careful evaluation of these non-cost or qualitative factors to ensure a strong foundation for future growth.