Industrial land demand, rents jump in ‘attractive’ Vietnam

HCM City (VNS/VNA) - Industrial land rents are expected to increase by up to 10% in the next two years in both the north and south thanks to growing demand from various industries, experts have said.

Despite facing difficulties due to the economic slowdown, many investors have announced tentative plans to expand their business and investment.

The latest quarterly Business Confidence Index from the European Chamber of Commerce in Vietnam (EuroCham) shows Vietnam’s global investment appeal remains strong. 

A notable 63% of surveyed businesses positioned Vietnam within their top 10 FDI destinations, EuroCham said.

VinaCapital’s ongoing annual investors’ conference also clearly indicates the attractiveness of the Vietnamese market with nearly 100 delegates from around the world attending it.

Don Lam, CEO and founding partner of VinaCapital Group, said: “It’s been three years since we were last able to host an in-person investor conference, and as we all know, the world has changed greatly since then.

“But one thing that hasn’t changed is Vietnam’s attractiveness for investment. Few countries have emerged from the global pandemic as strong as Vietnam has, and we are excited for our guests to see and hear that the opportunities for investing here are as abundant as ever.”

Recently UK company Essentra Components announced plans to invest in Vietnam.

Scott Fawcett, its CEO, said: “With more manufacturers moving into new territories as they look to diversify and become less reliant on one area, they need partners that can move with them and continue to offer the same level of service they are accustomed to.

“Our expansion into Vietnam is a solution to that very problem and will give our customers the reassurance that service can continue without interruption.”

The company said with its advantageous geographical position and 17 free trade agreements with countries in Europe and the Americas, Vietnam has become a strategic destination in the global supply chain, particularly in the manufacturing and industrial component sectors. 

Major corporations such as Apple and LEGO have already begun building primary production facilities in Vietnam at a cost of billions of dollars. 

With international investors flocking to the country, the demand for industrial land has been rising.

A recent report by property consultancy CBRE said that in the first nine months of 2023 investors from China, Vietnam, Japan, the US, and the European Union actively looked for industrial land, warehouses and factories, and accounted for 70-80% of the inquiries it got. 

With Vietnam continuing to strengthen cooperation with comprehensive strategic partners such as the US, the Republic of Korea and China in recent times, investors from these countries were expected to lead the demand for industrial real estate, it said.

The occupancy rate at industrial parks in the south was 81.9% as of the end of the third quarter, it said.

There were significant transactions by Chinese and Japanese enterprises in industries such as chemicals, plastics, rubber, and electronics.

In the north, the occupancy rate was marginally down from the end of the second quarter to 80.2% in the third quarter of 2023 though up 0.4 percentage point year-on-year. 

It explained that this was because new industrial parks opened in Bac Ninh and Hung Yen provinces, causing supply to soar. 

The market saw large transactions by businesses in plastics, textiles and contact lenses, it said. 

The industrial land absorption rate was up 18% at 700ha. 

Thanh Pham, associate director, research and consulting, CBRE Vietnam, said: "The net absorption for the country as a whole is expected to be higher in 2023, showing demand is recovering. We see a positive performance, especially in industrial land and ready-built factory segments.”

Demand for ready-built factories was mainly from industries such as garment, pharmaceuticals and electronics, she said. 

Demand for warehouse lease saw an impressive recovery from the previous quarter, with large transactions carried out by logistics enterprises, she said. 

Speaking about future trends, she expected developers and enterprises to focus on sustainable development and technology use. 

“Green criteria are gradually becoming among the important ones in building factories and warehouses and manufacturing, spurring the development of green industrial parks.”

In the next two years industrial land rents are expected to increase by 6-10% a year in both the north and south, according to CBRE. 

Rents for ready-built factories and warehouses are expected to see lower increases of 2-4%./.