Industrial real estate expected to grow in 2024

In the first nine months of 2023, tenants from China, Japan, the US, and the European Union accounted for about 70 - 80% of the demand for industrial land and warehouse rentals in both the Southern and Northern regions.

Mr. Le Trong Hieu, Head of Advisory and Transaction Services at CBRE Vietnam, indicated that the warehouse and ready-built factory segments had a successful year. Notably, the Northern area saw the biggest new supply ever, with 770,000 m2 of ready-built warehouses/factories going into service in 2023.

Benefiting from the "position" of the nation

Both the Northern and Southern markets have witnessed positive absorption rates, with ready-built factory occupancy rates remaining consistent at 86% in the North and marginally improving to 85% in the South, despite a significant increase in supply... Notably, the Southern region's absorption area in the second half of 2023 was 3.8 times larger than in the first half of the year, owing to favorable policy modifications by investors.

This suggests that industrial real estate is thriving throughout the overall real estate sector's challenges, aided by Vietnam's growing worldwide prominence.

Especially now that Vietnam has elevated its collaboration to a comprehensive strategic relationship with key partners such as the United States, South Korea, and Japan..., investment flows from these countries will continue to drive demand for local industrial real estate.

A EuroCham research showed that Vietnam's standing as an investment "hotspot" improved dramatically in Q4/2023, with an astonishing 62% of respondents rating Vietnam among the top ten global investment locations, with 17% placing Vietnam first. This is demonstrated by the fact that 53% of respondents expect foreign direct investment (FDI) in Vietnam to rise by the conclusion of this quarter.

Ms. Trang Le, Senior Director of Consulting and Research at Jones Lang Lasalle Vietnam, believes that by 2024, the contemporary ready-built warehouse segment will have a major fresh supply of high-quality projects in Bac Ninh, Hai Phong, and Hung Yen.

According to projections, supply will grow by around 700,000m2, increasing the total supply of contemporary ready-built warehouses to 1.6 times the existing level by the end of 2024. Furthermore, in the medium term, this segment in the North is likely to continue expanding throughout adjacent provinces (Vinh Phuc, Bac Giang, and Quang Ninh) due to competitive land costs and accessible land for new project construction.

A promising destination for investors

Regarding the market, Ms. Nguyen Hoai An, Senior Director at CBRE Vietnam, believes that the Vietnamese industrial real estate market will continue to see positive changes due to growth expectations in FDI capital and the diversity of FDI enterprise industries, particularly in high technology content. In addition, an increasing number of enterprises and renters are including sustainable development goals in their selection criteria for manufacturing and warehouse construction locations. This element will propel the construction of new green facilities into the future.

Ms. Pham Thi Mien, Deputy Head of Market Research and Investment Promotion at VARS, believes that the industrial real estate market will continue to expand well in 2024. This area continues to provide new manufacturing and commercial assistance for technology businesses, particularly those in the high-tech industry.

Furthermore, FDI flows continue to be favorable due to tax incentives. The transportation system is becoming more coordinated and contemporary, thanks to a commitment to significant regional infrastructure investment. Industrial park auxiliary services are constantly being improved.

Many new industrial park investment projects have received investment principles approval, allowing them to proceed to the next level. The availability of industrial real estate is expanding in both the north and south. The demand for industrial real estate is extremely high...

Furthermore, several provinces and cities' plans for the 2021- 2030 period have been authorized, which will resolve some of the legal concerns associated with industrial parks. In 2024, these variables will help the industrial real estate industry maintain its position and flourish.

According to Mr. Pham Vu Thang Long, Head of Macroeconomics at HSC Securities Company, despite the challenges that real estate faces in 2023, investment commitments in this sector are at their highest level since 2019, indicating that Vietnam is a promising destination, particularly for industrial real estate. With Southeast Asia's lowest urbanization rate, Vietnam will continue to profit from the trend of transferring supply chains to the nation in 2024 and beyond.