Demand for real estate in industrial park is growing positively

Industrial real estate in the Northern region has high demand from the electronics sector. Photo: Internet

Demand and rental capacity of increase

According to the Ministry of Construction, in the third quarter, the country recorded supply from projects, such as VSIP II with a scale of 500 hectares in Nghe An; VSIP Can Tho has a scale of 900 hectares; VSIP Bac Ninh II scale 282ha, Gia Binh Industrial Park II scale 250ha in Bac Ninh; Long Thanh high-tech industrial park with a scale of 410 hectares in Dong Nai...

The amount of FDI capital in the processing and manufacturing industry in the first 9 months of 2023 continues to lead in total investment capital with more than USD 14 billion, accounting for nearly 69.3% of total registered investment capital and an increase of 15% over the same period in 2022. In addition, the trend of shifting industrial real estate investment capital flows of multinational corporations into Vietnam in recent times has impacted the demand for real estate. Industrial park real estate has positive growth in 2023.

In particular, industrial real estate in the Northern region has high demand from the electronics sector, for the Southern region it is the automobile, garment, and packaging manufacturing groups.

​According to surveys of a number of real estate service organizations, rental demand and rental capacity for industrial real estate in the quarter tended to increase slightly compared to the previous quarter.

In particular, the industrial park occupancy rate in key markets in the North and the South is maintained at about 85% to 90% for both types of industrial land, factories and ready-built warehouses. The transaction rate of industrial land increased by about 5.9% compared to the previous quarter, overall in the first 9 months of 2023 is 20% higher than the whole of 2022.

Regarding rental prices, the average rental price in industrial parks in the third quarter of 2023 is basically stable compared to the second quarter of 2023. The average industrial land rental price in tier 1 markets in the South reached USD 189 /m2/remaining term, a slight increase of 1% compared to the previous quarter and 13% higher than the same period last year. The market recorded large transactions from Chinese and Japanese businesses with a variety of industries such as mechanical, chemical, plastic, rubber, and electronics.

Double-digit rent increases reduce competition in the Northern economic zone

Regarding the industrial real estate sector, according to the 2023 Industrial Real Estate Market Focus Report of Savills Vietnam, with many advantages, in the first half of 2023, the North attracts the largest foreign investment for with the manufacturing sector with USD 3.4 billion, equivalent to 63% of newly registered manufacturing FDI projects with 238 new projects.

Of which, Bac Giang accounts for 20% of the total newly registered projects with USD 1.06 billion including the investment in Singapore's Fulian Precision Technology factory, worth USD 621 million and the project of LONGi Green Energy Technoly Co. Ltd, worth USD 140 million. Bac Ninh ranks third nationwide in attracting manufacturing FDI with 9% of total registered capital worth USD 486 million.

In the first half of 2023, the North recorded 68 industrial park projects with a total area of up to 12,000 hectares. The average occupancy rate reached 83%, up from 81% over the same period last year. The average land rental price reached 138 USD/m2/rental period, up from USD/102 m2/rental cycle.

Among them, Bac Ninh has the largest increase in land rental prices of 48% compared to the same period in 2022, reaching 156 USD/m2/rental cycle thanks to the renewed interest of electronics companies and suppliers in demand diversifying supply chains outside of China.

Hung Yen had an increase of 45% over the same period, reaching USD 132 /m2/rental cycle. Similarly, key provinces simultaneously recorded an increase with Hai Duong (up 33%, reaching USD 101 /m2/rental cycle), Hai Phong (up 28%, reaching USD 129 /m2/rental cycle).

According to Mr. John Campbell, Deputy Director, Head of Industrial Services, Savills Vietnam, current land rental prices in the Northern Economic Zone have exceeded double digits, reducing the competition of the Northern Economic Zone compared to with the South. Higher land prices could deter new electronics, auto and solar manufacturing businesses from entering. These are investors who want to own large plots of land but at a reasonable price.