Industrial property an outlier within a weakening market
Industrial property an outlier within a weakening market
In the midst of a difficult time in real estate in many segments, from land plots to individual houses and apartments, industrial real estate remains attractive to both investors and tenants.
According to data from the Housing and Real Estate Market Management Agency under the Ministry of Construction, in the third quarter of 2022, the occupancy rate of industrial parks (IPs) remained high, especially for ready-built and rental demand.
The occupancy rate of IPs was about 83 per cent in the northern provinces and 84 per cent in the south. Along with that, land rental prices in IPs in Q3 increased slightly by about 5 per cent compared to the previous quarter.
International investors have quickly seized the opportunity to meet this high demand.
Savills’ Industrial Insider report shows that, in 2022, a number of ready-built factories have started construction to add supply to the market, including SLP Long Hau in Long An province, Ho Nai IP in Dong Nai province, Core5 Haiphong in Haiphong city, and VLI in Hung Yen province.
The industrial real estate market is also supplemented with new supply from a number of projects that have been launched, such as the Soc Son, Dong Anh, Bac Thuong Tin, Phung Hiep, and expanded Phu Nghia IPs in Hanoi; as well as Son My I IP in Binh Thuan province.
Currently, the entire southern key economic region of eight provinces and cities boasts around 140 parks in operation with a total leased area of more than 33,000 hectares, accounting for one-third of the country’s leasable area and twice the leasable area in the north.
The demand for industrial land rental in recent years has increased sharply, and especially so this year. The southern market witnessed big deals such as Lego and Pandora leasing in VSIP 3 in Binh Duong province, and Coca-Cola in the Phu An Thanh IP in Long An province.
Ho Chi Minh City is leading the market with an average rental price of $6 per sq.m per month. The rental market has witnessed a trend of longer-term rentals for factory leasing contracts lasting for 2-3 years instead of the typical 6-12 months. In some localities such as Ba Ria-Vung Tau, Tay Ninh, and Tien Giang, the lease term is up to 5-6 years, much higher than the rest of the market.
Traditional occupations dominate in IPs in the region, especially textiles and garments, footwear, rubber, and plastic.
Nguyen Van Dinh, chairman of the Vietnam Real Estate Realtors Association, said that the industrial real estate segment currently has an occupancy rate of less than 90 per cent, which will lead to a high demand for housing and resorts of professionals and workers. Therefore, localities where large-scale IPs locate need to promote the products and services to serve this increasing demand.
Resolution No. 29-NQ/TW, which promotes modernisation, has identified targets by 2030 that Vietnam will be in the top three in ASEAN in terms of competitiveness. In which, the industrial proportion will reach over 40 per cent of GDP, processing and manufacturing will hit 30 per cent of GDP, and high-tech industrial products in processing and manufacturing will reach over 45 per cent. In addition, the added value of manufacturing and processing industries per capita aims to be over $2,000.
