The successful containment of the COVID-19 has accelerated the trend of Vietnam becoming one of the world’s leading destinations for foreign firms to restart manufacturing. As a result, the industrial property sector has been least impacted by the pandemic.
At the end of the third quarter of 2020, overall average rent for industrial rent rose significantly by 4.9% q-o-q and 9.4% y-o-y in Ho Chi Minh City, mainly due to limited new supply and rising demand for industrial land amid the wave of companies moving production out of China. The overall market rent remained the highest nationwide, 30% higher than that of Hanoi, 60% - 70% higher compared to Binh Duong and Dong Nai, and more than double that of Ba Ria - Vung Tau. In Hanoi, the average asking rent was stable QOQ but increased by 3.2% YOY due to rising rents at existing industrial parks with limited new land supplied. Hanoi remained the highest average rent for industrial land among northern provinces reaching in some areas up to 260 USD/m2. Hai Duong the proverbial spider in the web of the norther industrial market remains competitive. Similar effect in the north with the emphasis on the east part of Hanoi where more logistics moving in and manufacturing moving to new former Tier 2 Economic Zone regions well linked as Tier 1 Economic Zone like Quang Ninh.
Logistics park developer Logos Property is launching its $350 million Vietnam venture and secured its first site in Bac Ninh province. In addition, warehouse Global Logistic Properties (GLP) announced its $1.5 billion joint venture with several logistics parks in the pipeline.
Paul Tonkes, Director, Logistics & Industrial, Cushman & Wakefield Vietnam, said “The actual appreciation of industrial land outpaces the annual escalation of factory and warehouse for lease in both Hanoi and HCMC and only in some specific areas rents specifically for warehouse for lease are staying ahead, becoming last mile hot spots while Industrial Parks inside the city slowly transform, for example more clinics, office development and showrooms taking up space.” Capital values of industrial land has risen by 20-30% in key economic provinces Dong Nai, Binh Duong, Long An and almost doubled in some cases in Industrial Parks in HCMC in the past years.
Total industrial stock in Ho Chi Minh City remained at nearly 2,500 ha, unchanged on both a quarterly and yearly basis, sustaining industrial real estate market performance. The strong performance of the industrial rental market is being driven by a lack of space, many industrial park expansions are awaiting legal procedures to be completed, as well as the rising demand for logistics facilities from companies moving production out of China.
This trend expected to benefit Vietnam as an attractive investment destination due to favourable government incentives, competitive labour costs, and stable macroeconomic and political environments.
Occupancy remained stable q-o-q and rose by 1 pp y-o-y to 84.8%, mainly due to improved take up recorded at industrial parks in districts to the north of the city. Both the north and south will see an enormous Industrial Land pipeline in the next three years especially 2022-2023 in both Tier 1 and well linked Tier 2 areas by converting agricultural land such as rubber plantations into industrial land more than 5,000 ha in Dong Nai, new Industrial Park in Binh Thuan and Tay Ninh. The north will see several 1,000 hectares added in Bac Giang, Hai Phong and Quang Ninh and not to mention the central coast with Binh Dinh, Hue and Quang Tri taking the lead and aiming to meet the expected continuously growing demand for industrial land post pandemic.
Paul added, “While currently warehouses may still have some idle space, the wave of investment and new orders into Vietnam has started to take shape and translated into new factory and warehouse for rent. Even with some unforeseen pandemic related bumps in the road ahead, I expect the pressure on warehouse and factory will remain stable and causing the rent to grow until 2022-2023. This is supported by new key infrastructure linking supply chains in a better and more efficient way. Therefore, the market, will return to be landlord favourable and remain on the rise.”