Knight Frank Chartered (Thailand) Co Ltd

Trade War Spillover Accelerates Capital Inflows into Thailand: FDI Reaches THB 1.14 Trillion as EEC Nears Saturation

Thailand’s manufacturing and industrial property market entered a structurally new phase in the second half of 2025, characterised by record foreign direct investment (FDI), historic levels of industrial land absorption, and near-full utilisation of ready-built factory space, according to Knight Frank Thailand’s latest Manufacturing Market Report for 2H 2025.

Despite a moderation in macroeconomic momentum, with real GDP growth easing to 1.2% year-on-year in Q3 2025, Thailand’s industrial sector continued to outperform, supported by strong external demand, trade surplus dynamics, and accelerating supply chain realignment driven by global trade and tariff considerations.

FDI hits THB 1.14 trillion as digital investment leads

By the end of 2025, Thailand recorded cumulative BOI-approved foreign direct investment of THB 1.14 trillion across 2,259 projects, representing an increase of 1,196 projects and THB 413.8 billion in approved value during the second half of the year alone. Average investment size rose to approximately THB 505 million per project, underscoring a clear shift toward larger, more capital-intensive developments.

Geographically, Singapore remains the primary source of foreign capital with a substantial investment of 433,019 million THB, followed closely by Hongkong and China, with China accounting for the highest number of projects at 984. Western and regional partners including the United Kingdom, Japan, and the United States also maintain a strong presence, highlighting a global vote of confidence. This trend reflects strong investor confidence, a pivot toward high-value digital infrastructure and electronics, and Thailand’s successful emergence as a strategic regional hub for advanced manufacturing and data services.

Thailand’s industrial landscape is shifting toward fewer, larger, and more capital-intensive investments. Industrial land absorption surged from 4,684 rai in H1 2025 to 12,955 rai by year-end, while average FDI per project rose to around THB 505 million, signalling a move toward higher-value investment even as the number of new factories declined.

This trend is most evident in the digital sector, alongside continued expansion in electrical and electronics, driven by demand linked to AI and data storage. In contrast, machinery and vehicles investment has focused mainly on capacity upgrades rather than new sites.

At the same time, new factory licences fell to around 1,250 in 2025, reinforcing the shift from “quantity” to “quality.” Many large, capital-intensive projects—particularly in digital infrastructure—require substantial land and investment but do not always need traditional factory licences, allowing land absorption and FDI inflows to rise even as licence counts decline.

Industrial land demand reaches historic peak

Demand for Serviced Industrial Land Plots (SILP) surged to unprecedented levels in 2025, with cumulative sales and leases reaching 12,955 rai, up sharply from 11,573 rai in 2024. The Eastern Economic Corridor (EEC) accounted for 10,497 rai, reinforcing its role as Thailand’s primary industrial engine.

While total SILP supply expanded modestly by just 0.8% half-on-half to 185,498 rai, the exceptionally high absorption rate pushed the national cumulative sales rate to 93.5%. Several regions are now effectively constrained, including the North at 99.5% utilisation, the West at 96.8%, and the Bangkok Metropolitan Region, EEC, and Central areas at approximately 95%.

This tight market has driven average industrial land asking prices to a record THB 6.65 million per rai, representing a 9.84% year-on-year increase. Price growth was most pronounced in the EEC, where average land prices surged 36.18% to THB 8.18 million per rai, while the Bangkok Metropolitan Region remained the highest-valued market at THB 14.0 million per rai.

Ready-built factory market enters full-capacity territory

The Ready-Built Factory (RBF) market tightened further in the second half of 2025, with new supply increasing by only 11,000 sq.m. as developers adopted a cautious, pre-commitment-led approach. Total national occupancy climbed to a record 98.4%, reflecting near-total absorption across Thailand’s core industrial clusters.

The EEC reached 99.94% occupancy, effectively eliminating move-in-ready options for new entrants, while the Central region and Bangkok Metropolitan Region maintained occupancy rates above 97% and 96% respectively. With total RBF supply stagnating at approximately 3.3 million sq.m., developers have increasingly shifted toward built-to-suit projects secured by long-term tenants.

This supply constraint has translated into steady rental growth, with average asking rents rising to THB 202.9 per sq.m. per month. The EEC recorded the highest rents at THB 217.1 per sq.m., followed by the Central region at THB 193.0 and the Bangkok Metropolitan Region at THB 186.8.

Structural shift reshapes Thailand’s industrial landscape

Knight Frank Thailand notes that the current cycle is no longer driven by simple manufacturing relocation, but by a deeper structural transformation toward capital-intensive, infrastructure-dependent, and technologically specialised industrial activity. Tariff asymmetries in the U.S. market, rules-of-origin requirements, and policy uncertainty are increasingly influencing how multinational firms design supply chains and select production locations.

This explains the coexistence of record land absorption, near-full occupancy, rising land and rental prices, and declining factory licence counts. Rather than signalling overheating, these trends reflect a transition from volume-led expansion to a regime focused on capital efficiency, asset quality, and strategic location.

The EEC remains the focal point of this transformation due to its superior infrastructure, logistics connectivity, and regulatory readiness. However, its near-saturation is increasingly acting as a filtering mechanism, concentrating investment in premium, infrastructure-ready assets, while selective spillover into the Central and Western regions is beginning to emerge.

Outlook: resilient but increasingly selective demand

Looking ahead, industrial demand in Thailand is expected to remain resilient, supported by ongoing supply chain diversification, digitalisation, and energy-related investment. The key risks facing the market are no longer cyclical economic slowdowns, but long-term structural constraints, particularly power availability, infrastructure capacity, permitting efficiency, and trade policy stability.

As a result, land and rental price growth is likely to persist but become more uneven, reflecting scarcity, differentiation, and asset quality rather than broad-based inflation.

Marcus Burtenshaw, Partner – Head of Industry Strategy & Solutions, Knight Frank Thailand, commented: “Thailand’s industrial market is entering a phase where quality, infrastructure readiness, and execution capability matter more than scale,” Knight Frank Thailand noted. “For investors and occupiers alike, strategic positioning will be critical as the market moves further toward capital-intensive and technology-driven growth.”