The industrial real estate segment is still the bright spot of the market when more industrial park investment projects are approved. However, the supply of this segment is assessed as still not enough for the market.
Destination of many large enterprises
Up to now, while other real estate segments are “frozen”, industrial real estate still has high operating capacity, with more projects being implemented.
To be able to become a bright spot of that market is thanks to the continued interest from global manufacturers, especially in the fields of electronics and energy to Vietnam. It is also a way of diversifying risk by adding sourcing and production locations. Therefore, the trend of investing in specialized property products such as warehouses, factories, logistics … is increasing day by day.
Major investment projects include the fact that Foxconn signed a memorandum of understanding on the study of subleasing 45 hectares of land in Quang Chau industrial park (Bac Giang) for $62.5 million to expand its scale. Or recently, Samsung also increased its total investment in Vietnam to 20 billion USD, focusing on developing industry groups in artificial intelligence (AI) and big data.
In addition, many other giants are planning to come to Vietnam such as Amkor Technology – the American company specializing in the production of semiconductor equipment. A representative of this company said that it will soon open a factory in the northern region.
Chinese electric vehicle (EV) maker BYD Auto Co plans to build a factory in Vietnam to produce auto parts to reduce the company’s dependence on China and further increase its supply chain in the South-East Asia as part of a global expansion strategy.
The reason why Vietnam has been chosen by many big corporations in recent times is pointed out that compared to some Southeast Asian countries, the price of industrial land in Vietnam is still relatively low.
Meanwhile, Vietnam has a lot of potential to become a leading industrial center in the region, and more and more foreign investors in the fields of high technology and electronics industry are also choosing Vietnam as a destination.
Through the survey, in the South, the average land rental price increased by 8-13% year-on-year and reached $166/m2/remaining lease term by the end of 2022, about 38% higher than the average of Northern region. The rental price can be more than 280-300 USD/m2/lease term in prime locations in Ho Chi Minh City, Binh Duong and Long An.
In the North, the most active tenants include electronics, solar and automotive manufacturers as well as prefabricated warehouse and prefabricated factory developers. The average rent of the northern tier-1 markets was at $120/m2, up 11% year-on-year.
However, along with being targeted as a supply location, the supply of industrial real estate has shown to be limited.
For the southern market, since mid-2022, no new products in the industrial real estate segment have been put into operation. This market is entering a difficult period to launch new projects, leading to supply constraints in the next phase.
As for the North market, because the industrial park was developed later than the South, the existing land bank in some provinces is still quite abundant with reasonable rental prices.
Meanwhile, many new projects are still waiting for approval, so the shortage of supply will only last until the end of 2023. In the period 2024-2026, there will be about 3,757 hectares of industrial park land that can be put into use, concentrated in Hai Phong, Vinh Phuc and Bac Ninh.
In addition, the difficulty in developing industrial real estate in Vietnam is related to FDI. According to the Ministry of Planning and Investment, the total FDI into Vietnam in the first quarter of 2023 was only 61.2% compared to the same period last year.
The reason is attributed to the difficult global economic context, resulting in new investment plans and production expansion being affected. This is also the main reason why Vietnam’s industrial real estate, which is evaluated with great potential, will face many challenges in 2023.
