Industrial real estate is bright spot in 2020 market

A view of Quang Chau industrial zone in Bac Giang province (Photo: VNA)

Hanoi - The industrial market is the only real estate sector that has enjoyed positive progress in both rental rates and occupancy rates during the COVID-19 pandemic.

Some provinces with hot industrial real estate markets include Long An, Dong Nai, Binh Duong, Binh Dinh, Thanh Hoa, Quang Ninh, Hai Duong and Bac Giang, according to the Vietnam Real Estate Brokerage Association.

In 2020, the average occupancy rate in industrial zones was up more than 70 percent year-on-year. The average factory rental price nationwide was 60-80,000 VND per sq.m and the purchase price of land in industrial zones with infrastructure ranged from 3 to 5 million VND per sq.m, according to Nguyen Van Dinh, Vice President cum General Secretary of the Vietnam Real Estate Brokerage Association.

A report from the association showed the number of proposals to research investment in new construction of industrial parks in 2020 also increased sharply compared to previous years.

Meanwhile, CBRE Vietnam said as of the fourth quarter of last year, average occupancy rates of existing industrial parks since 2019 in five key northern industrial cities and provinces (Hanoi, BacNinh, Hung Yen, Hai Duong and HaiPhong) reached 89.7 percent, a 2.1 percentage points increase year-on-year.

Similarly, the occupancy rate of four key southern industrial cities and provinces reached 87.0 per cent, a 2.5 percentage points increase from a year prior.

Due to the production movement from China as well as the European Union (EU) – Vietnam Free Trade Agreement (EVFTA), demand for industrial land is increasing across Vietnam. CBRE recorded that asking rents in some industrial parks in Hai Phong, Bac Ninh and Hai Duong in the North and HCM City, Dong Nai and Long An in the south increased from 20 percent to 30 percent.

The performance of ready-built factory and warehouse market remained stable due to large supply added in 2019 and 2020 as well as delayed leasing activity from travel restrictions.

The strong growth of e-commerce and logistics companies since the outbreak of COVID-19 boosted demand for storage space and distribution facilities.

As a result, the need to find land for developing logistics facilities increased significantly, reflected in the 20 percent of total inquiries for this sector, recorded by CBRE.

In prime locations with limited industrial land supply, high-rise warehouses have also started to emerge to create larger storage space for the needs of e-commerce companies, a representative of CBRE Vietnam said.

With its resilience during the pandemic, the industrial sector in Vietnam has become attractive for both international and local players, according to the representative.

In 2020, despite the pandemic, international warehousing giants such as GLP, LOGOS, and JD.com invested Vietnam. Vingroup, a major local real estate developer, also recently joined the market with two new industrial parks expected to be ready in 2021.

Expansion of existing factories and new construction of manufacturing facilities in the context of accelerated relocation strategy will be the main source of demand going forward.

While industrial land rent has reached a high level in well-located industrial parks, tenants have to seek new land supply in areas further from existing industrial hubs.

In addition, industrial real estate developers are making changes in product development to adapt to the new situation. Outstanding features are the application of modern technology to management and operation of the facility, providing service packages including legal and human resources to help customers save time and costs during project implementation, the representative said.

This is gradually creating a new model of industrial real estate development in Vietnam, integrating industrial property provision and investment with management support services.

The Vietnam Real Estate Brokerage Association said there will be many new industrial zone infrastructure development projects approved in the near future.

Along with that, many logistics projects serving industrial zones will also be promoted and the rental price of warehouse and factory premises in 2021 is forecast to not increase compared to 2020.

At present, Vietnam has 260 industrial parks in operation and 75 under construction.