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Industrial Zone land rents rise as big companies flock to Vietnam

Industrial real estate has shown positive signs after the country began reopening international air routes. However, higher leasing fees are a concern.

With high demand for logistics services caused by the relocating of production bases to Vietnam, a series of projects have kicked off in both the north and south.

In early 2022, GLP, the global leader in logistics real estate, established GLP Vietnam Department Partners I with total investment capital of $1 billion in six projects related to logistics center development which have a total area of 900,000 sq m.

VSIP had started construction of a 1,000 hectare technology park in Binh Duong province, while JD Future Explore V Limited has started building Logistics JD Property  (Vietnam) Hai Phong 1 in the non-tariff zone and Nam Dinh Vu Industrial Zone (IZ) which covers an area of 97,000 sq m. 

Meanwhile, MWID has started Project 16 – BW Phu Nghia ready-built warehouse in Phu Nghia IZ in Hanoi. This is the first project of BW in Hanoi. 

The market has seen series of M&A deals in the field. BW Industrial, the industrial real estate developer co-founded by Warburg Pincus and Becamex IDC, has announced acquisition of 74,000 sq m of land in Bac Tien Phong IZ in Quang Ninh, developed by DEEP C.

Meanwhile, CapitalLand Development has announced the signing of an MOU on cooperation and investment with Bac Giang provincial People’s Committee. The two sides will step up development of an urban area – industry – logistics project which covers over 400 hectares. The committed investment capital is $1 billion (VND23 trillion)

One of the recent noteworthy transactions is Boustead Projects’ purchase of 49 percent of shares in KTG & Boustead in the Yen Phong IZ in Bac Ninh province, at $6.9 million.

In addition to traditional real estate, investment in data center real estate was announced last June by the Hong Kong-based Gaw Capital Partners. This  be a level 3 data center, on an area of 6,056 sq m in HCM City Hi-tech Park.

Other major electronics manufacturers such as Samsung, LG Display, Xiaomi and Goertek have also publicized plans to expand business, increase capital, or lease workshops to start production in Vietnam.

CBRE Vietnam has recorded data about five cities/provinces in the north (Hanoi, Hai Phong, Bac Ninh, Hung Yen and Hai Duong) with 15,000 hectares of industrial land. Meanwhile, major cities in the southern region (HCM City, Dong Nai, Binh Duong and Long An) have over 30,000 hectares.

Land rent

Thanks to satisfactory occupancy rates in IZs, the land rents in major industrial cities have increased significantly, by 5-12 percent in the north and 8-13 percent in the south, compared with the same period last year. 

In some IZs, the offered land rents have increased by 20 percent i  some projects in the north, and 26 percent in the south. The industrial land prices are expected to maintain high levels, while warehouse and workshop rents will see slight fluctuations, 0-3 percent per annum.

According to Colliers, land rents in industrial centers such as Bogor - Sukabumi, Tangerang and Bekasi in Indonesia hover around $157-295 per sq m, which is 42-51 percent higher than IZ centers in Vietnam such as Binh Duong, Dong Nai, Bac Ninh and Hai Phong.

SSI experts estimate that industrial land in Vietnam has risen by 8-9 percent in the south and 6-7 percent in the north in 2022.

In the next three years, industrial land supply will increase by 14,000 hectares for both northern and southern regions. Of this, second-class industrial provinces will account for 21 percent and 42 percent of supply in the south and north, respectively.

The industrial land rents are predicted to increase by 5-10 percent per annum in the next three years in the north, and 8-13 percent in the south.

CBRE predicted that an additional supply of workshops will be strong in the next three years. The accumulated supply in the north will exceed 2.6 million sq m of total floor area, of which 87 percent of new supply in 2022-2024 will come from Hai Phong and Bac Ninh. Meanwhile, the south would have a supply of 5 million floor area by 2024, of which 60 percent of new supply would come from Binh Duong.

CBRE hopes the logistics area reserved for e-commerce will grow. For every one billion dollars worth of revenue from e-commerce, the market needs 92,903 sq m more of logistics area. In the next five years, Vietnam is predicted to need 160-200 million of logistics area specifically reserved for e-commerce.

Duy Anh

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