Industrial real estate sector maintains growth momentum
HCMC – The growth prospect of the country’s industrial real estate market is bright, with ample new supply
Industrial real estate in Vietnam is considered a bright spot in the market today. In the last quarter, rents of this segment continued to increase in both regions.
According to the Vietnam Association of Realtors (VARS), in the last quarter, the industrial real estate market continued to be "bright" despite the general difficulties of the real estate market and the decline in global trade. Many industrial park investment projects have been approved for investment policies, starting to implement the next stages.
According to VARS, Vietnam is positioned as one of the very potential locations for production expansion and is emerging as a bright spot for logistics and supply chain shifts in the Asia-Pacific region. A series of "eagles" from the US and South Korea with large-scale FDI inflows are looking for development opportunities in Vietnam. According to Nikkei Asia, Apple's supply chains, such as BOE, Quanta, Compal, Goertek, and Foxconn, now have machinery in industrial zones of Bac Ninh, Bac Giang, Vinh Phuc, now plans to open and expand factories in Bac Ninh, Nam Dinh, Nghe An, Quang Ninh provinces shortly − Business delegation accompanying President of Korea with the largest scale ever. It is expected to strengthen cooperation with Vietnam in the supply chain, new technology, energy and environment.
Large corporations have invested in Vietnam and have plans to expand soon, such as Samsung increasing its investment capital to 20 billion USD, LG will invest another 5 billion USD in Vietnam, and SK stepping up pouring capital into Vietnam through investments in Masan, Vingroup,...
VARS said that the industrial real estate market appeared as a bright spot in handling administrative procedures and granting investment registration certificates to foreign enterprises from the local government of Quang Ninh province. This will certainly be a highlight to help Quang Ninh continue to score points in the eyes of investors and is a lesson for other localities to study and follow.
This unit said that the market is currently witnessing the emergence of new industrial parks, investing in modernization and automation, with special attention to the "green" criterion with measures to reduce CO2 emissions. This is an important factor contributing to increasing the competitiveness and attractiveness of Vietnam's industrial parks in the race to attract FDI.
"In the not-too-distant future, these standards will become the top selection criteria of investors, especially foreign investors. Trends in industrial real estate investment cash flow Multi-storey factory models have been interested and deployed in the North. Bac Ninh is the pioneer province. Hung Yen is the next locality that will apply this model. At the same time, the cash-flow industrial real estate solution with a multi-story factory model will become an attractive investment channel soon," VARS said.
Regarding the industrial real estate market, Ms. Nguyen Hoai An, Senior Director of Market Research and Development Consulting CBRE, said that in the first 6 months of the year, this segment continued to be the bright spot of the real estate market.
Industrial land rents maintained strong growth in both regions due to limited land availability and positive absorption capacity. The average rental price for the tier 1 market in the North and South is USD 127 and USD 187/m2/term, respectively. In the past 4 years, the average rent has increased by 7%/year in the North and 13%/year in the South.
The market for warehouses and ready-built factories witnessed strong supply growth. In the first 6 months, 0.9 million m2 of ready-made warehouses and factories were completed in the tier-1 market in both regions, of which 60% of the supply came from the North.
Supply has increased by more than 20% per year in the North and 18-49% per year in the South over the past 4 years. As competition accelerates, the rent growth of these segments is moderate, maintaining 2-3 %/year for the past 4 years.
Regarding demand, the northern region continued to record strong demand from the electronics sector. In the first half of the year, the market saw 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 sectors also contributed to industrial land and ready-built factories recording good absorption in the North.
Meanwhile, in the South, market demand is very diverse. Tenants from the automotive, apparel and packaging industries are among the industry groups actively seeking industrial land, warehouses and ready-made workshops in the South.
In the future, industrial land rents are expected to increase at a lower rate than before, around 4-8 %/year after a period of strong growth. Meanwhile, ready-built warehouse rents in both regions may increase slightly by less than 4% in the next 12 months due to high competition from future projects.
