Rental prices for industrial real estate continue to rise

Rental rates for industrial real estate are projected to rise further.

Cushman & Wakefield (C&W) Vietnam's experts believe that thanks to the China plus one strategy of manufacturing companies, the demand for industrial real estate may slow down but will still remain stable. The rental prices for ready-built industrial real estate are still reasonable, while industrial land rental prices continue to rise.

Tam Duong I Industrial Park - Zone 2 in Vinh Phuc Province provided 116 hectares of fresh industrial real estate supply in the first three months of the year. However, there was no new supply recorded in the warehouse segment.

Investment waves in key Northern areas, including the electronics and automotive industries such as Goertek, Xiamen Sunrise Group, and Autoliv, have supported a 1% increase in quarterly occupancy rate with an absorption rate of 81 hectares, owing to advantages in prime location, infrastructure, and connectivity.

The demand for supporting businesses in the electronics sector and manufacturing firms has remained consistent in the ready-built factory market, resulting in a small increase in figures for the quarter. However, due to an unfavorable economy, the occupancy rate in this market fell slightly in the quarter.

As a result, rental costs for ready-built real estate are projected to grow further. According to one expert, altering market rental prices without relying on local consensus will have an impact on FDI investors. when a result, there must be a legal foundation for municipalities and enterprises to alter industrial real estate rental prices when market supply and demand vary.

Rental rates for industrial sites will rise further. Due to considerable demand for this type of property, the offered rental price for major industrial parks was $115/m2/lease term in Q1/2023, up 2.9% quarterly and 5.5% yearly.

Meanwhile, ready-built factory rental prices increased by 1.9% quarterly due to some rental price adjustments, reaching $4.7/m2/month. The monthly leasing price for ready-built warehouses is unchanged at $4.5/m2.

Industrial real estate is a type of commercial asset that requires control to stabilize the market. 

Industrial real estate is a sort of business asset that requires management to keep the market stable. Furthermore, when market confidence is high, companies are less likely to overbid, which can lead to costs exceeding quality and making it more difficult for investors to enter the market.

When demand falls, so do rental prices, resulting in inefficient use of land resources and negative effects on industrial production. since a result, the industrial real estate market should not overheat, since it has a significant impact on the economic and society of many communities.

Regarding the prospects of real estate in 2023, Mr. Thomas Rooney - Senior Manager of Industrial Consultancy Services at Savills Hanoi, believes that the risk level for the Vietnamese economy is lower than other markets such as Malaysia, Laos, Cambodia... Vietnam also benefits from FDI capital, has advantages in labor resources, and opportunities to export to the Chinese market.

Despite the adverse effects of global politics, the domestic economy is still expected to maintain stability thanks to domestic consumption. However, the market will still face many long-term challenges regarding labor and infrastructure for tenants.

Mr. Thomas evaluated that labor resources in Vietnam are vast, and the economy is progressing, but skilled labor is still scarce. Therefore, to attract investor attention, the government needs to ensure the quality and quantity of skilled labor.