Industrial expansions help record stronger absorption

July 19, 2023 | 09:00
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The industrial estate market was a bright spot in Vietnam in the first half of 2023 with a positive absorption rate in industrial land, ready-built factories, and warehouses both north and south.

Duong Thuy Dung, head of Valuation, Research, and Consulting at CBRE Vietnam, said that although the supply chain was disrupted and a shortage of orders occurred in almost all traditional industries, there has still been an expansion of activities among foreign enterprises so far this year.

“The northern region continued to record strong demand from the electronics sector. In the first half of the year, the industrial market recorded the expansion of large manufacturers such as Foxconn and Goertek in industrial zones (IZs) in Bac Giang and Bac Ninh provinces,” Dung said.

Industrial expansions help record stronger absorption
Industrial expansions help record stronger absorption, Photo: Le Toan

In addition, the strong expansion of Chinese manufacturers in different sectors also contributed to the industrial land and ready-built factories segment recording good absorption in the north.

Meanwhile, southern market demand was very diverse. Tenants mainly from the vehicle, textile and packaging industries were among the most active seekers of industrial land, warehouses and ready-made workshops.

In the industrial land market, the absorption area of northern and southern tier-1 markets reached 386 ha and 397 ha, respectively. This absorption was 20 per cent higher for the south and 60 per cent for the north compared to the same period last year.

Due to the limited availability of industrial land available for handover in both regions, while demand is abundant, the rental price of such land continues to maintain a strong growth rate.

For the warehouse and ready-built factory market, supply has grown strongly over the past three years, CBRE said.

In the first six months, 900,000 sq.m of ready-made warehouses and factories were completed in the tier-1 market in both regions, in which 60 per cent of supply came from the north.

Supply has increased by more than 20 per cent annually in the north and 18-49 per cent annually in the south over the past four years. As competition increases, the rental growth rate of these segments has maintained 2-3 per cent per year for the past four years.

John Campbell, head of Industrial Services at Savills Vietnam, confirmed that Vietnam’s industrial market was currently benefiting from the advantages of border opening and the stable exchange rate and an attractive corporate tax rates.

“In particular, multinational companies are looking to diversify their areas of operation, or relocate from China, industrial real estate in Vietnam will become a bright spot by creating better conditions to draw investors,” said Campbell.

It is expected that industry and manufacturing will take the lead in attracting foreign capital, with foreign investors’ increasing interest in industrial land and high-quality ready-built supply.

However, finding a supply of such land is becoming a difficult problem for businesses, and the occupancy rate of IZs is consistently at a high level.

Campbell said that to best support the supply of industrial land to meet the needs of the market, procedures in investment, as well as legal and project approval needed to be accelerated.

A report released in July by Mirae Asset Securities assessed that the China +1 strategy would open up opportunities for northern IZs. Enterprises with large land banks located in the north are the main beneficiaries of this trend.

“Many new projects are expected to commit to investing in Vietnam in the near future. In addition, electronic component manufacturers in the Taiwan market are interested in the Vietnamese market and have plans to expand investment in the north,” the report said.

In addition, the flow of public investment is a factor supporting the development of IZs in the long term. Accelerating infrastructure investment will be a top priority of the government in 2023-2025, with a goal of completing more than 1,600 km of highways over the next three years.

“The development of infrastructure will increase the attractiveness of IZs in the long term, through optimising operating and transportation costs,” it said.

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