Warehouse and factory market is booming

After a period of stagnation, the market for ready-built warehouses and factories in the South has begun to witness many transactions and shows many positive prospects in the long term.

Demand is more positive

In the third quarter of 2024, the modern ready-built warehouse segment in the Southern region will have more than 103,000 m2 of new warehouses, developed by BWID and Vietnam Industrial Park.

Specifically, BWID marked its presence in Long An with the completion of a two-storey warehouse project with a total area of ​​64,000 m2. Meanwhile, Vietnam Industrial Park simultaneously launched phase II of projects in Ho Nai Industrial Park ( Dong Nai ) and Phu An Thanh Industrial Park (Long An), providing an additional nearly 40,000 m2 of multifunctional space, serving both warehousing and production purposes.

The trend of asset conversion continued to be recorded in the last quarter. According to a report by JLL Vietnam, the northern area of ​​Binh Duong province recorded more than 18,000 m2 in a ready-built warehouse project converted into ready-built factories. By the end of Q3/2024, the total supply of modern ready-built warehouses increased to 2 million m2, up 4.4% quarter-on-quarter and 14.7% year-on-year. Of which, BWID and Mapletree accounted for 30% and 20% of the total supply, respectively.

The industrial real estate market used to be a traditional market, mainly developed by domestic investors. However, in recent years, we have seen stronger interest and investment from foreign investors, from Singapore, Korea and Thailand.

- Ms. Pham Ngoc Thien Thanh, Head of Research and Consulting Department of CBRE in Ho Chi Minh City

Supply increases, occupancy rates are also positive. According to JLL, after a period of stagnation, the Southern logistics market entered the second half of the year with positive net absorption, reaching nearly 160,000 m2 in Q3/2024. New leases were mainly signed by tenants serving the domestic market, including manufacturers and third-party logistics service providers (3PL). Accordingly, facilities located in core areas with convenient connections to Ho Chi Minh City continue to be sought after.

CBRE also recorded vibrant leasing activities in both warehouses and ready-built factories in the last quarter. The average warehouse occupancy rate increased by 7% compared to the previous quarter, reaching 68%; the ready-built factory occupancy rate increased by 3% compared to the previous quarter, reaching 84%. Customers with demand for ready-built warehouses in the South come from manufacturers in the high-tech, electronic components, and logistics sectors, in addition to the expansion of companies in the e-commerce sector.

Mr. Alex Crane, Managing Director of Knight Frank Vietnam, commented that due to external factors, investors are approaching the market cautiously, but the market still has some signs of recovery. He said that the improved supply, along with a slight increase in asking rents, shows that businesses have growing confidence in the long-term prospects of the market.

“The continued development and exploitation of ready-built factories is a positive signal, giving tenants more motivation to consider Vietnam as a suitable destination for investment or business expansion,” said Mr. Alex Crane.

In addition, according to this expert, the southern warehouse market depends mainly on export demand and domestic consumption growth. After 2024, when the world elections end, especially the US presidential election, the needs of the markets will be clearer and can boost the demand for warehouses in the South.

Discount to stimulate liquidity

Market liquidity in the warehouse and factory segment has improved a lot, but Ms. Trang Le, Senior Director of Consulting and Research (JLL Vietnam) acknowledged that demand is still relatively low compared to the end of last year. "Exports have not fully recovered, so distribution centers maintain their current scale, instead of expanding to anticipate the sudden increase in goods at the end of the year as usual."

To maintain liquidity, Ms. Trang said, some projects with low rental yields have adopted a stronger demand stimulus strategy through reduced asking rents. In particular, in emerging areas outside the city center, rental prices in the third quarter decreased significantly compared to the previous quarter, while prices in the core area remained stable.

The average asking rent for modern ready-built warehouses in the South decreased slightly to USD 4.85/m2/month, down 0.4% QoQ, but still up 3.1% YoY.

“Landlords are still flexible and creating favorable conditions for negotiations to support tenants in the context of a slow market. One of the significant incentives in some newly completed warehouses is the rent-free period of more than 6 months for 3-year leases,” Ms. Trang added. The rental situation in the last months of the year is expected to improve because the fourth quarter is usually the peak season, but the expected improvement is not too dramatic.

Sharing the same view, Mr. Alex Crane said that in the short term, the warehouse market will face some difficulties due to increased supply and reduced absorption, however, this expert believes that the medium to long-term prospects of industrial real estate in the South are still very positive, with many high-quality projects with affordable rental prices.

Knight Frank experts predict that the market will recover significantly by 2025. Some projects that were delayed in the previous period have now been completed, along with growing investor confidence, which are expected to boost demand for industrial land. The region's strategic location, improved infrastructure, and preferential policies will continue to play a key role in attracting foreign direct investment and promoting economic growth.

Source: https://baodautu.vn/batdongsan/thi-truong-nha-kho-nha-xuong-khoi-sac-d227553.html