Good news from industrial real estate in the South

Southern industrial real estate flourishes

According to Bnews , real estate research companies noted that the industrial real estate market in the Southern region in the third quarter of 2023 was vibrant and prosperous with many ready-built factory and warehouse projects entering the market.

Ms. Trang Bui - General Director of Cushman & Wakefield Vietnam Company said that after about 2-3 years of no new industrial park land supply in the Southern Key Economic Zone, the third quarter of 2023 witnessed new supply from Long An with the entry of Nam Tan Tap Industrial Park developed by Saigontel Company into the market, contributing about 171 hectares to the market.

The average occupancy rate reached nearly 82%, equivalent to net absorption of 116 hectares, up 66% quarter-on-quarter; of which, Long An and Ba Ria - Vung Tau had the highest net absorption rates with proportions of about 59% and 28% respectively. The market performance was good thanks to the recovery of the industrial production sector.

Cushman & Wakefield predicts that with the continuous efforts of investors and local authorities, there will be an abundant supply of new industrial land entering the market.

From now until 2026, the future supply is about 5,700 hectares, mainly coming from neighboring provinces of Ho Chi Minh City such as Binh Duong, Dong Nai, Long An, Ba Ria - Vung Tau. In the context of high demand for land rental, land rental prices are forecast to continue to increase.

Real Estate - Good Signals from Southern Industrial Real Estate — The industrial real estate market in the Southern region is bustling in the third quarter of 2023. Illustration photo from the internet.

In terms of ready-built factories, in the third quarter of 2023, a new project in Dong Nai entered the market with a scale of 32,500 m2. According to Ms. Trang Bui, along with the recovery of the industrial sector, leasing activities became more vibrant, with the occupancy rate increasing by 2.2 percentage points quarter-on-quarter, equivalent to 143,000 m2 of ready-built factories absorbed.

This absorption rate is 2.4 times higher than in the second quarter of 2023. Dong Nai leads in rental demand with nearly 60% of total absorption. Demand for ready-built factories in the South is diverse, coming from many different industries such as textiles, chemicals, and electronics.

Average rents remained stable both quarterly and year-on-year, reaching USD 4.7/m2/month. Most projects maintained rents amid competitive supply. High-demand rental locations such as Dong Nai and Ba Ria – Vung Tau had the highest year-on-year growth, between 2.4 and 2.5%.

Forecasting the prospects of the ready-built factory market, Cushman & Wakefield Vietnam said that the market will continue to be vibrant with about 2.5 million square meters of ready-built factories coming to the market between the end of 2023 and 2026 with the participation of both domestic and foreign investors.

Ready-built factory absorption rate is forecast to continue to increase in the following quarters, as the market benefits from the shift of production facilities from China to Vietnam.

Following the trend of ready-built factories, the ready-built warehouse sector also recorded 2 new projects entering the market in Dong Nai and Binh Duong with a scale of about 110,000 m2.

According to Cushman & Wakefield's analysis, along with the positive growth of the transportation industry thanks to increasing demand from the domestic manufacturing and consumption sectors, ready-built warehouse leasing activities also witnessed a significant increase in net absorption, 6.7 times higher than the previous quarter.

Dong Nai province leads in warehouse rental demand with 67% of total net absorption thanks to the expansion of the 3PL industry (companies providing transportation and cargo management services for other companies) in this province.

The Cushman & Wakefield report shows that the average rental price of ready-built warehouses remained stable on a quarterly basis but increased by 2.2% on a yearly basis, reaching US$4.4/m2/month. Similar to the ready-built factory market, ready-built warehouse developers have kept rental prices stable to attract tenants in a competitive market.

After a period of abundant new supply entering the market, the future supply of ready-built warehouses will slow down to only about 1.7 million square meters in the period 2023 - 2026. Warehouse rental demand will continue to be maintained by domestic consumption, Vietnam's export-oriented economy and the growth of the logistics and e-commerce market.

Industrial parks across the country have high occupancy rates of over 80%. Northern provinces reached 83% and the southern region reached 91%. The scarcity of new supply in Binh Duong and Dong Nai has lasted since 2020.

However, new industrial park projects and land funds in Long An and Ba Ria - Vung Tau are positive bright spots attracting investors and tenants in these areas.

Many foreign investors are "hunting"

According to Cong Ly newspaper, in the first 9 months of 2023, tenants from China, Japan, the US and the European Union, Vietnam were active investors looking for industrial land and warehouses in the Vietnamese market.

That is the information provided by CBRE Vietnam experts at the 3rd quarter 2023 press conference on the real estate market and market forecast in the coming time.

Specifically, according to a research report by CBRE Vietnam, in the first 9 months of 2023, the industrial real estate market recorded businesses from China, Vietnam, Japan, the US and the European Union as 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.

Industrial land absorption in tier 1 markets reached 251 hectares in the second quarter, bringing the absorption rate to more than 700 hectares in the first 9 months of 2023, 18% higher than the absorption rate of the whole year of 2022.

Industrial land rental prices continue to increase due to positive demand. Industrial real estate rental prices in both the North and the South also recorded increases due to positive demand, in which the average rental price for the primary market reached 131 USD/m2/term in the North and 189 USD/m2/term in the South.

Ms. Pham Ngoc Thien Thanh, Head of Research and Consulting Department of CBRE Vietnam, said that 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.

At the same time, it is forecasted that in the next two years, industrial land rental prices in Vietnam are expected to increase by 6-10%/year in both the North and the South. Positive demand from many industries and many nationalities helps to boost rental growth in many localities. Along with that, ready-built warehouse rental prices are forecast to increase slightly by 2-4%/year in the next two years.

Sustainable development and high technology continuously attract the attention of investors and businesses. Green criteria are gradually becoming one of the important criteria in developing factories, warehouses, workshops and promoting the development of green industrial parks in the future.

Dao Vu (T/h)

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