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Surge in Industrial Real Estate Prices as Major Manufacturers Invest in Vietnam

Industrial real estate prices surge as major manufacturers invest in Vietnam

In a report on the industrial real estate sector for the first half of 2024, positive developments were highlighted by Nguyen Hoai An, Senior Director of CBRE Hanoi branch.

Leading the market in the North are electronics manufacturers with significant transactions from companies like Victory Giant and Foxconn in Bac Ninh. Major factories such as Pandora’s in Binh Duong, Suntory Pepsico’s in Long An, and SK’s in Hai Phong are under construction.

There is a rising demand for data centers within the industrial real estate market. Thomas Rooney, Senior Manager of Savills Hanoi’s Industrial Real Estate Division, mentioned that foreign businesses are increasingly looking for data center locations in Vietnam. Alibaba plans to invest over $1 billion in constructing a data center, while Amazon Web Services has already launched edge data centers in Hanoi and Ho Chi Minh City.

CBRE reported that industrial land prices in tier 1 markets in the North have increased by 0.3% from the previous quarter and 4.5% year-on-year, averaging $134/m² of remaining lease term. In the South, prices are stable at $173/m² of remaining lease term, up 1% from the previous year.

During the first half of the year, 220 hectares were leased in the North, leading to an occupancy rate of 83%. In the South, the occupancy rate remains steady at 89% with 259 hectares. Manufacturers are expanding into areas like Long An and Ba Ria Vung Tau due to higher land availability and competitive rental rates.

For ready-built warehouses in the North, around 225,000m² was recorded in the first half of the year, predominantly for ready-built factory space, accounting for 95%. The lease rate for ready-built factories was significantly higher compared to warehouses. By the end of Q2, the occupancy rate for ready-built factories stood at 89% while warehouses maintained a rate of 79%. Rental rates for ready-built factories were $4.9/m²/month, increasing by 1.9% year-on-year, while warehouses stood at $4.6/m²/month. Major tenants in these spaces include electronics, semiconductors, furniture, and logistics industries.

JLL predicts a substantial new supply in the ready-built warehouse market in the North during the second half of 2024, with around 131,000m² available for lease in Bac Ninh and Hung Yen. Noteworthy projects include Frasers Hung Yen, Thuan Thanh 3B Industrial Park, and SLP Park Thuan Thanh II, bringing the total market supply to over 1.3 million m² by the end of 2024.

No new supply of ready-built warehouses was recorded in the South, but 371,000m² of ready-built factories were added in major projects in Binh Duong and Dong Nai. Rental rates for warehouses and factories stood at $4.5 and $4.9/m²/month, respectively. High-tech and renewable energy companies, along with e-commerce firms, are primary tenants of ready-built warehouses.

Nguyen Hoai An expects industrial land rental rates to rise by 5-8% in the North and 3-7% in the South over the next three years. Rent for ready-built warehouses and factories is anticipated to increase by 1-4%, with factories experiencing a more significant rise over the next three years.

“Given the development of transportation infrastructure, the industrial real estate market is expanding into new areas such as tier 2 markets and border economic zones. The market will become more vibrant in the future with the growth of existing and new investors,” noted An.

Report

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