Market is quiet, industrial real estate is still "blooming"

In particular, Vietnam's upgrading of its cooperative relations to a comprehensive strategic level with major partners such as the US, South Korea, and China is expected to continue to drive investment flows from these countries, leading the demand for Vietnam's industrial real estate market in the coming time.

According to a report by CBRE Vietnam, the industrial real estate market continued to record positive developments in the third quarter of 2023. Specifically, in the Northern region, the average occupancy rate of industrial parks in the tier 1 market reached 80.2%.

Industrial real estate market, Van Thang Hoa image 1 — Despite the sluggish market over the past year, industrial real estate continues to be the “bright spot” of the market. (Photo: CD)

Industrial land rental prices continued to increase due to positive demand. In the third quarter, 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.

Meanwhile, in the southern region, the average occupancy rate in industrial parks reached 81.9%. In terms of rental prices, the average industrial land rental price in tier 1 markets 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, and electronics.

In the first nine 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 USD 4.5/m2/month for warehouses and USD 4.9/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 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. For the Northern market, the average warehouse rental price is at 4.6 USD/m2/month and the factory is at 4.8 USD/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. 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 source of 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.

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 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 (EU) were active investors looking for industrial land and warehouses in the Vietnamese market; accounting for about 70 - 80% of the number of leasing inquiries.

Regarding future trends, Ms. Pham Ngoc Thien Thanh, Head of Research & Consulting Department of CBRE Vietnam, said: The total absorption area of the market in 2023 is expected to be higher than in 2022, showing the recovery of demand.

“We have recorded positive performance, especially in the industrial land and factory sectors, with diverse demand,” said Ms. Thanh.

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 businesses.

“Regarding future trends, sustainable development and high technology 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,” Ms. Pham Ngoc Thien Thanh added.

Source