The next decade will accelerate shifting supply chains whereby manufacturing and production locations will diversify to multiple locations across Thailand, Southeast Asia and India. According to JLL, (NYSE: JLL) markets like Thailand stand to be net beneficiaries of companies diversifying manufacturing capabilities to complement existing bases in China, however, companies will need to be flexible when considering locations and funding options to take advantage of volatility in supply chains. 

Over the past few years, companies have begun exploring the relocation of manufacturing outside of China. In Asia Pacific, this near/re/friend shoring trend has resulted in the China+1 strategy where companies add additional manufacturing bases outside of China to hedge against supply chain disruptions by reducing reliance on a single country. 

"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,” says Michael Glancy, Country Head of Jones Lang LaSalle (Thailand) Limited (JLL). 

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

"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 recognize Thailand as a prime location for their production base, thanks to its strategic geographical position, well-developed infrastructure & 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. Our goal is to ensure that they can seamlessly integrate into the value chain and maximize the opportunities presented by Thailand's thriving manufacturing industry." says Mr. Krit Pimhataivoot, Head of Capital Markets, Jones Lang LaSalle (Thailand) Limited (JLL). 

“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,” says Michael Ignatiadis, Head of Manufacturing Strategy, Asia Pacific, JLL.  

The driving force behind this trend is not only the need for supply chain diversification, but also to capitalise on the strong economic fundamentals of this region, including a large population and labour pool, favourable costs, and various incentives. From a manufacturing investment perspective, these factors position SEA and India as major manufacturing hubs for global markets. 

According to multiple sources, rising costs in China over the past decade have served as the primary accelerator of this shift towards diversification. Higher demand for industrial land, coupled with rising wages and material costs, has also pushed up land prices in China, which can be up to two times higher compared to some SEA countries and India. 

JLL estimates China holds the lion’s share of manufacturing FDI in the region, but the gap is narrowing. Furthermore, factors such as skilled labour, infrastructure, environmental regulations, proximity to suppliers and customers, and political stability contribute significantly to a factory’s long-term success and sustainability. JLL recommends careful evaluation of these non-cost or qualitative factors are crucial to make an informed decision and lay a strong foundation for future growth. 

Download JLL’s report here.