Industrial real estate Vietnam: A bright spot in the market

Although the Covid-19 epidemic is still very unpredictable in the world, due to its effective control, Vietnam is emerging as a "bright spot".

Industrial production in September has prospered, opening up hope for a soon recovery and strong growth again in the fourth quarter and next time. Service activities in September grew again, consumer demand recovered. The evidence is that Vietnam's PMI Purchasing Managers' Index (assessed by Nikkei) increased to 52.2 points in September, the highest in ASEAN (compared to 45.7 points in August), showing the trend of clear recovery of the Vietnam economy.

Covid-19 has greatly influenced the operations of many enterprises in all fields of activity, and real estate being as well. At present, there are up to 923 real estate enterprises forced to declare dissolution, or suspend operations in the past few months of 2020. The aforementioned figure has been given by the Vietnam General Statistics Office with comments that Real estate is the sector most severely hit by the Covid-19 pandemic.

Commenting on the market in recent years, the representative of the Vietnam Real Estate Association said that right after Tet holiday, the real estate market overview seems clearly revealed the deep colors caused by the epidemic. However, in this gloomy picture, the main highlight is the industrial park real estate.

According to data from the Ministry of Construction, industrial real estate market still attracts tenants of which rents increase by about 9% over the same period in 2019. Some experts agree that despite being affected by the Covid epidemic, attracting investment in industrial zones has a clear breakthrough as many business owners have been moving factories from China to Vietnam. Thanks to its cost-efficiency advantages, development of infrastructure and supportive policies from the Government as well as a very-effective disease control, Vietnam is being evaluated as IDEAL CHOICE of foreign investors compared to other countries in the region.

According to statistics of the Ministry of Planning and Investment, in September 20, 2020, of total newly-registered capital, adjusted and contributed capital, buying shares of foreign investors reached USD 21.2 billion , then Ho Chi Minh City and Hanoi are still the leading regions in the country in attracting new projects.

Specifically, Ho Chi Minh took the lead when attracting 719 projects with a total registered capital of USD 3.25 billion, accounting for 15.3% of total investment capital. Hanoi ranked second with 409 projects, reaching 2.92 billion USD, accounting for 13.8% of total investment capital. A series of large corporations have planned to move a part of production line from China to Vietnam such as Microsoft, Google, Panasonic, Sharp, Foxconn, etc.

And the latest report of Jones Lang Lasalle Vietnam Company (JLL Vietnam) opens another aspect of industrial zone real estate, which shows the the Covid-19 outbreak causing difficulties to project fieldwork and face-to-face meetings among industrial park developers and investors. However, the demand for industrial properties for lease still keeps increasing in the third quarter of 2020 as Vietnam has remained a favorable destination for investors.

To meet the demand in the context of limited travel, many online platforms have been invested such as online virtual field, online seminar, website upgrade, etc., which helps tenants have opportunities to evaluate potential abroad.

Besides, there are still some transactions that started in this quarter. In fact, the average occupancy rate of industrial parks in Vietnam in the northern region (Hanoi, Hai Phong, Bac Ninh, Hung Yen and Hai Duong) reached 74% in the third quarter, equivalent to increase of 160% compared to the first quarter of the year.

JLL also noted that land prices in Northern market reached a new peak with 102 USD/m2 for whole rental cycle in the third quarter of 2020, meaning an increase of 7.1% over the same period last year. Prefabricated factory for rent also increased slightly, ranging from 4.1 USD - 5.2 USD/m2/month in the third quarter of 2020, up 2.1% over the same period last year. With the existing land bank, Hai Phong and Bac Ninh are leading in the supply source of industrial land in the North.

JLL emphasized that the supply of industrial land in the North is expected to increase in the next 5 years. The main source of demand for industrial land remains manufacturers who want to diversify their production portfolio out of China, especially high-tech industries. And the key customers for ready-built factories for rent are small and medium-sized enterprises.

Source: https://tapchitaichinh.vn/thi-truong-tai-chinh.