Industrial real estate picture contrasting from north to south

May 16, 2023 | 10:16
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While industrial real estate in the north is recording a strong increase in supply, rent, and occupancy rates, the south of the country is enduring reduced rental demand and legislation obstacles.

In the first quarter, the northern industrial market welcomed a new supply of about 116 hectares for Tam Duong I Industrial Zone (IZ) located in northern Vinh Phuc province. Meanwhile, no new warehouse supply was recorded in this quarter.

Industrial real estate picture contrasting from north to south
Tam Duong Industrial Park I, source:

According to Cushman & Wakefield (C&W), currently, many IZ investors are speeding up construction to be able to hand over land to customers. By the end of 2023, it is expected that the market will receive an additional supply of 670ha of industrial land.

The future supply of ready-built factories (RBFs) and ready-built warehouses (RBWs) will continue to be abundant towards 2025, with 1.2 million sq.m of factories and 700,000 sq.m of warehouses entering the market.

Thanks to its favourable location, improved infrastructure, and connectivity, the northern key economic region continues to receive a wave of investment, especially from the electronics and automobile industries. Among the outstanding manufacturers are Goertek, Autoliv, and Xiamen Sunrise Group.

C&W forecast that in the northern market, the demand for industrial real estate will still be maintained thanks to the expansion of manufacturers out of China, but is likely to slow down soon enough. Furthermore, industrial land rents will continue to increase. The RBW rental rates may continue to rise, but at a slower pace depending on market developments.

In the south, meanwhile, the industrial real estate market did not record any new IZ supply in Q1 due to lengthy legal and procedure process. A supply of 82,000 sq.m of factories and 51,500 sq.m of RBW were reported. New supply may slow down in 2023, at nearly 1.1 million sq.m for both RBWs and RBFs, C&W said.

In the short term, the supply of IZ land will continue to be limited, while the supply will continue to increase, but at a slower rate than 2022.

Dong Nai province, a location with a strong track record for manufacturers, also faces difficulties in industrial real estate development.

According to Nguyen Huu Nguyen, director of Dong Nai Department of Planning and Investment, many groups are asking for large-scale land to build a production base, but such land has been exhausted.

“The giant Lego project had to move from Dong Nai to Binh Duong province after it waited three years for land here. These types of issues are a serious challenge for Dong Nai,” Nguyen said. “We have also not paid enough attention to adding value as well as the quality of labour. That is why Dong Nai has numerous immigrants but low quality of labour.”

Currently, Dong Nai has plans to set up another nine IZs alongside the 31 that are already in operation.

Meanwhile, weak infrastructure, planning quality, and ineffective mobilisation of capital are some of the limitations for attracting more investors in to IZs and economic zones in Ca Mau province.

According to the Management Board of Ca Mau Economic Zone, the quality of planning has not been met in the long term due to the fluctuating socioeconomic situation. The province is facing difficulties in mobilising capital to build infrastructure and mostly depends on the budget distribution from the government.

Besides that, the zones have not been able to mobilise other capital sources, such as government bonds and official development assistance. Other formats such as public-private partnerships have not been promoted.

In addition, at present, Ca Mau’s IZs are offering general preferential policies found in the rest of the country, which is deemed inadequate to entice potential investors.

Ca Mau province has three established IZs with a total area of about 662ha. Over the past few years, about 200 delegations of domestic and foreign investors have come to explore opportunities in the province. Among those were the Wealth Power Vietnam Group, Thien Phuc Industrial Park Investment, Tuan Chau Group, B.Grimm Power of Thailand, Infrastructure Investment and Transport JSC, Yat Fung International Holdings, Hong Ha Petroleum, Minh Phu Seafood Corporation, and Indochina International Infrastructure Group.

However, the amount of available land in this province is minimal and cannot meet their demand, authorities said.

According to C&W, in the first months of 2023, challenges from the global economy caused the amount of registered foreign capital and export orders to the south region to decrease. Global economic uncertainties, weakening consumption, and reduced export orders have been affecting the demand for industrial real estate rental in the short term.

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