Industrial real estate remains a bright spot in the Vietnamese market

Due to the limited availability of industrial land for handover in both regions, while demand is abundant, industrial land rental prices continue to maintain strong growth.

Industrial real estate in Thu Duc city, Ho Chi Minh City. (Photo: Hong Dat/VNA)

Industrial real estate continues to be a bright spot in the Vietnamese real estate market in the first half of 2023 with positive absorption rates recorded in both industrial land, ready-built factories and warehouses (RBF and RBW) in both the North and the South.

Rental prices maintain strong growth

According to experts, for the industrial land market, the absorption area in the first 6 months of 2023 of the Northern and Southern tier 1 markets reached 386 hectares and 397 hectares, respectively. This absorption level is 20% higher for the South and 60% higher for the North compared to the first half of 2022.

Due to the limited availability of industrial land for handover in both regions, while demand is abundant, industrial land rental prices continue to maintain strong growth.

Average rental prices for the tier 1 market in the North and South are at USD 127 and USD 187/m2/remaining term, respectively.

Over the past four years, average rents have increased by 7% per year in the North and 13% per year in the South.

For the ready-built warehouse and factory market, supply has grown strongly over the past three years.

In the first six months of 2023, a total of 0.9 million square meters of ready-built warehouses and factories were completed in the tier 1 market in both regions; of which, 60% of this supply came from the North.

Supply has increased by more than 20% per annum in the North and 18-49% per annum in the South over the past four years. As competition has increased, rental growth in these segments has been moderate, remaining around 2-3% per annum over the past four years.

Ms. Duong Thuy Dung, Head of Valuation-Research and Consulting, CBRE Vietnam, said that in the first 6 months of 2023, the supply chain was disrupted, and the shortage of orders occurred in most traditional industries such as garment and footwear. However, the electronics, information technology and communications and high-tech industries still recorded the participation and expansion of foreign enterprises.

In terms of demand, the Northern region continues to record strong demand from the electronics sector. In the first half of 2023, the industrial real estate market recorded the expansion of major manufacturers such as Foxconn and Goertek in industrial parks in Bac Giang and Bac Ninh.

In addition, the strong expansion of Chinese manufacturers in various fields also contributed to the industrial land and ready-built factory segment recording good absorption in the North.

Meanwhile, the demand in the southern market is very diverse. Tenants in the automobile, garment and packaging industries are among the groups actively seeking industrial land, warehouses and ready-built factories in the South.

CBRE Vietnam believes that in the future, industrial land rental prices are expected to increase at a lower rate than before, falling to about 4-8%/year after a period of strong growth.

Meanwhile, ready-built warehouse rental prices may only increase slightly by less than 4% in the next 12 months in both areas due to higher competition from future projects.

Huge demand from global manufacturers

According to experts, the industrial real estate market has witnessed a resurgence in Vietnam after two years of hiatus due to the pandemic.

Notably, as soon as borders reopened, international investors and buyers quickly arranged site surveys, signed memoranda of understanding (MOUs), leases and sales agreements.

Tan Dong Hiep B Industrial Park, Di An City, Binh Duong Province. (Photo: Hong Dat/VNA)

The industrial real estate market is also witnessing interest from global manufacturers with large investment needs, especially in the fields of technology, green energy, and logistics.

Regarding future trends, Ms. Pham Ngoc Thien Thanh, Head of Research and Consulting at CBRE Vietnam, shared: “Although we have not seen clear evidence of rental price differences for green-certified industrial projects in Vietnam, tenants have begun to show a preference for projects that are developed sustainably and focus on renewable energy. In fact, there are more and more industrial projects registered and certified with LEED in Vietnam.”

As of the third quarter of 2023, a series of industrial real estate projects have registered for LEED certification, such as Core5-Hai Phong, Logos-Bac Ninh, RBW in Phu Tan Industrial Park-Binh Duong, RBW in Xuyen A Industrial Park-Long An... Like other commercial sectors, sustainable development will also become a mandatory trend of industrial real estate.

According to Mr. John Campbell, Deputy Director, Head of Industrial Services, Savills Vietnam, Vietnam's industrial market is currently benefiting from the advantages of the border opening process, stable exchange rate of Vietnam Dong; attractive corporate tax rate. In particular, with the fact that multinational companies are looking to diversify their areas of operation, or relocate from China, Vietnam's industrial real estate market is increasingly becoming a bright spot by creating conditions to attract investors.

Industry and manufacturing are expected to lead the way in attracting foreign capital flows, with foreign investors keen on industrial land and high-quality ready-built supply.

However, finding industrial land supply is becoming a difficult problem for businesses, as the occupancy rate of industrial parks is always high.

Mr. John Campbell said that in order to best support the supply of industrial land to meet market demand, issues regarding investment procedures, legality and project approval processes need to be accelerated.

Investors also expect the progress, compensation and site clearance process to be carried out more quickly and effectively.

At the same time, it is possible to be facilitated to receive licenses, master planning maps, construction certificates, land use right certificates, etc. as soon as possible./.

Source: https://www.vietnamplus.vn/bat-dong-san-cong-nghiep-van-la-diem-sang-cua-thi-truong-viet-nam/873774.vnp

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