Industrial real estate maintains growth momentum in the year-end period

Occupancy rates remain high

According to the announcement on the focus of the real estate market in Ho Chi Minh City in the third quarter of 2023 just announced by CBRE, the Southern industrial market has an average occupancy rate in industrial parks of 81.9%. In addition, the absorption rate of industrial land in the quarter reached more than 190 hectares, an increase of 5.9% compared to the previous quarter, with a total of more than 770 hectares in the first 9 months of 2023, 20% higher than the whole year of 2022.

In terms of rental prices, the average industrial land rental price in tier 1 markets in the South reached 189 USD/m2/remaining term, continuing to increase slightly by 1% compared to the previous quarter and 13% higher than the same period last year. The market recorded large transactions from Chinese and Japanese enterprises with diverse industries such as mechanics, chemicals, plastics, rubber, electronics.

Meanwhile, in the Northern market, the average occupancy rate of industrial parks in the Tier 1 market reached 80.2% in the third quarter of 2023, down 2.4 percentage points compared to the previous quarter and up 0.4% percentage points year-on-year.

Industrial real estate keeps growing in the late year period picture 1 — Industrial real estate still maintains growth momentum.

The decrease in the quarterly occupancy rate came from the operation of new industrial parks in Bac Ninh and Hung Yen markets, increasing the total industrial land supply by 597 hectares.

In terms of demand, the market continued to record large transactions from tenants in the plastics, textile, and contact lens manufacturing industries in many provinces and cities. The absorption rate of industrial land in Tier 1 markets reached 251 hectares in the quarter.

In the first nine months of the year, the total absorption rate reached more than 700ha, 18% higher than the absorption rate of the whole year of 2022. Industrial land rental prices continued to increase due to positive demand. In the third quarter of 2023, the average rental price for the Tier 1 market in the North reached 131 USD/m2/remaining term, up 2% quarter-on-quarter and 12% year-on-year.

Warehouse supply increases sharply to meet demand

In the first 9 months of the year, the Southern and Northern markets recorded 450,000 m2 and 752,000 m2 of new warehouses and factories coming into operation, respectively. With abundant new supply, warehouse and ready-built factory rental prices were relatively stable, with average rental prices reaching 4.5 USD/m2/month for warehouses and 4.9 USD/m2/month for factories in the Southern market.

The occupancy rate of ready-built warehouses reached 56%, down 15 percentage points compared to the second quarter of 2023 and 13 percentage points compared to the same period last year. Meanwhile, the occupancy rate of ready-built factories has always been maintained at a good level, reaching 91%, up 1 percentage point compared to the second quarter of 2023.

For the Northern market, the average warehouse rental price was at USD 4.6/m2/month and that of the factory reached USD 4.8/m2/month. The occupancy rate of ready-built factory projects in the Tier 1 market reached 82.9%, up 4.7 percentage points compared to the previous quarter.

Industrial real estate keeps growing in the late year period picture 2 — Warehouse supply continues to increase sharply due to high demand.

For the ready-built warehouse market, the main transactions still come from markets with large supply concentrations such as Bac Ninh and Hai Phong . The main demand still comes from 3PL units and food and beverage manufacturing companies. The occupancy rate of the ready-built warehouse segment by the end of the third quarter of 2023 reached 76.8%, an increase of 1.2 percentage points compared to the previous quarter.

CBRE believes that in the next two years, industrial land rental prices are expected to increase by 6-10% per year in both the North and the South. Positive demand from many industries and many nationalities will help boost rental growth in many localities. Meanwhile, ready-built warehouse rental prices are forecast to increase slightly by 2% - 4% per year in the next two years.

In the first 9 months of 2023, tenants from China, Vietnam, Japan, the US and the European Union were active investors looking for industrial land and warehouses in the Vietnamese market; accounting for about 70 - 80% of the number of leasing inquiries to CBRE in the Southern and Northern regions.

With Vietnam continuing to strengthen its cooperative relations with comprehensive strategic partners such as the US, South Korea and China in recent times, tenants from these countries are expected to continue to lead the demand for Vietnam's industrial real estate market in the coming time.

According to Ms. Pham Ngoc Thien Thanh - Head of Research & Consulting Department of CBRE Vietnam, “The total absorption area of the market in 2023 is expected to be higher than in 2022, showing a recovery in demand. We have recorded positive performance, especially in the industrial land and factory types with diverse demand sources. The main demand for ready-built factories comes from a variety of industries such as garment, pharmaceuticals, electronics, etc. Warehouse rental demand recorded an impressive recovery compared to the previous quarter, with large transactions coming from logistics enterprises”.

Speaking more about future trends, CBRE experts said that sustainable development and high technology trends are continuously attracting the attention of investors and businesses. Green criteria are gradually becoming one of the important criteria in the development of factories, warehouses and workshops, promoting the development of green industrial parks in the future.

Source