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McClatchy-Tribune  06/23/2014 12:01 AM ET
Gaining momentum, at last [Bangkok Post, Thailand :: ]

June 23--Land sales in industrial estates are expected to recover in the second half of this year after the Board of Investment (BoI) last week made great strides in approving applications for major projects which had been pent up almost for nine months.

Although the approval by the BoI may not boost industrial land sales overnight, it will boost confidence among foreign investors.

"The bottom [of the industrial estate market] has already passed," said Thavich Taychanavakul, managing director of the industrial estate developer Hi-Tech Industrial Estate.

"It is a good sign after the BoI's main board approved large-scale projects but recovery momentum will be significantly gained next year."

The BoI, chaired by junta chief Gen Prayuth Chan-ocha, last Wednesday approved 18 projects worth a combined 123 billion baht. Most of them are in the automobile and auto-parts manufacturing industry.

"The National Council for Peace and Order has restored investors' confidence after it announced its economic policies and pushed up many projects that were pent up during the political crisis," he added.

Mr Thavich said overall industrial estate market in the first five months saw the biggest decline in recent years, with a 50% year-on-year drop in land sales.

During the sluggish period, industrial estate developers needed to sustain business with sales promotions and slowed investment in new land development, as customers who were not confident about the political and economic situation delayed their decisions.

"When one of the country's largest car makers delayed investment in a new factory for another six to 12 months, other vendors and manufacturers that supported its business needed to slow down as well," Mr Thavich said.

The industrial estate market is expected to pick up again in the second half. Last year, industrial land sales were estimated at 5,000 rai.

In the first half, Hi-Tech froze new land development in its industrial estate in Ayutthaya but plans to launch 100 rai of land in the second half with the aim of closing sales within one year.

From January-May, the company sold 50 rai in Prachin Buri province, where it has 1,100 rai of land, said Mr Thavich.

David Nardone, president and chief executive of SET-listed industrial estate developer Hemaraj Land and Development Plc, said company sales in the first five months were lower year-on-year.

"The market has been slower, hit by political disruptions as well as lower overall demand, a depressed automobile sector and exports up only slightly," he said. "However, activity has now returned to a more normal level."

The delay in BoI approvals affected developers, as many investors had not been able to finalise their plans even though they intended to invest further.

Hemaraj reported land sales of 100 rai in the first quarter but maintains target sales of 1,600 rai in 2014.

"With the BoI now in place, the environment has improved," said Mr Nardone. "We will benefit in from the recovery in all industries across our estates."

Nivat Eno, associate director of property consultancy Knight Frank Chartered (Thailand), said land sales in industrial estates through the company from July 2013 to June 2014 had sharply dropped to 1.8 billion baht from 3 billion baht in the previous 12-month period.

The slowdown began last October as many BoI applications were held up. However, the 18 big projects approved last week will trigger many industrial estate developers to revise their business plans in the second half.

They include the Eastern Seaboard Industrial Estate, Pinthong Industrial Estate, Amata City Industrial Estate and Amata Nakorn Industrial Estate (Chon Buri), with a total of 17 projects planning to use a combined 400 rai.

Knight Frank has at least five deals with combined investment of 4.3 billion baht waiting for confidence recovery. Most of them are in the automobile and auto-parts sector. One is an aviation training centre.

Two-thirds are new investors, mainly Japanese, Mr Nivat said.

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