VN's industrial realty still grows during pandemic

While many realty segments have suffered losses from the pandemic, industrial realty business have kept growing in Vietnam.

VN's industrial realty still grows during pandemic
During the pandemic, the industrial realty sector kept growing in Vietnam.— Photo congnghiepdanang

In the first quarter, industrial park rental rates increased in both the north and the south by 12 per cent and 6.5 per cent respectively over the same period last year, according to the first quarter report by real estate consultant Jones Lang LaSalle (JLL) Vietnam.

The report stated that northern industrial realty attracted some large corporations which extended their production from China due to the close location and well-developed infrastructure.

The average land prices in such areas reached US$99 per sq.m per lease term of 50 years, said the report, adding the demand for land rent in the first quarter still remained high as successful transactions were done before the pandemic.

In the south, JLL recorded an increase of industrial rent demand and also saw higher rental prices. The average rental prices in the first quarter reached $101 per sq.m per lease term.

According to realty experts, a number of multinational companies have been planning to expand their operations in Vietnam to reduce the pressure of new tariff barriers on goods exported from China to the United States and seeking replacement markets as prices there went up since 2019.

Data from the US Census Bureau shows that the volume of US goods imported from Vietnam in 2019 increased by 35.6 per cent, in contrast to a decrease of 16.2 per cent in goods imported from China.

 

As a result, the experts believed the trend of producers shifting from China to other Southeast Asian nations including Vietnam would continue this year.

A report by Mirae Asset Securities in early February confirmed that industrial realty continued to have bright prospects despite the general difficulties.

Currently, Vietnam has 326 industrial parks with a total area of ​​over 95,500 hectares. With growing demand and rental prices, developers were building more parks. In the future, there will be another 13,000 hectares of industrial parks in the north and 18,000 hectares in the south.

Seeing the increase, a representative of realty service firm Savills Vietnam said: "Although foreign investment in the local industrial realty segment is still maintained well this year, the pandemic raised concerns about labour shortages and supply chain disruptions in the manufacturing sector.”

Stephen Wyatt, General Director of JLL Vietnam, said: “Vietnam remains a promising market with a growing trend of manufacturing companies looking to set up operations in the country, which has been happening for a number of years. Industrial park developers remain confident that demand for industrial land will continue to grow and therefore land prices are expected to increase in-line with the long-term potential of Vietnam’s industrial segment.”

JLL’s expert concluded: “With Covid-19 and trade tensions driving the shift of production lines from China to Southeast Asia, Vietnam, in particular, seems to have emerged as an attractive destination for investors and manufacturers alike.”  VNS

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