The industrial park attracts customers from electronics and toy manufacturing

In the past 12 months, large-scale industrial land transactions have attracted customers in industry groups includinglogistics, electronics, and toy manufacturing.

In the past year, this market has been challenged with two waves of the Covid-19 epidemic (third and fourth time) breaking out in industrial centers in the northern and southern key economic regions. The supply chain was temporarily interrupted in the third quarter due to anti-epidemic regulations in many provinces and cities. However, the industrial park market has been maintained and recovered quickly when the government eases the epidemic prevention measures in the fourth quarter of 2021.

Regarding transaction size in the past 12 months, land lease transactions were pretty diverse, ranging from the smallest size of 3-5 ha to the largest size of 40 ha in many industry groups. Notably, large-scale industrial land transactions at 20-40 hectares has been recorded a great demand from tenants in the logistics, electronics, and toy manufacturing industries. A typical example of a large-scale industrial land transaction is the recent announcement of a Lego factory which will be built in Vietnam applied high environmental, social, and governance (ESG) criteria to the design. 

The logistics and electronics sectors are highly active with leasing activities of existing industrial land, warehouses and workshops in the North and the South. In addition, industry groups such as packaging, solar energy production in the North, furniture and medical equipment in the South are emerging with many successful transactions during the year.

The disruptions in the supply chain create more opportunities for the industrial park and logistics markets in locations near seaports, inland ports, and major aviation centers according to Asia-Pacific report of the unit. The reason is to manage risks in supply chain as new priorities are sorted out including the need to diversify production, increase inventories of inputs, and increasingly store finished products near consumption points.

In the fourth quarter of 2021, the average occupancy rate at industrial parks in five vital industrial provinces and cities in the North (Hanoi, Bac Ninh, Hung Yen, Hai Duong, and Hai Phong) reached 79.3 %, up 3.6 percentage points year-on-year. Similarly, occupancy rates in the four central industrial provinces and cities in the South reached 87.3%, up 0.11 percentage points year-on-year.

Despite the pandemic, average land rents have remained stable due to favorable occupancy rates in the main industrial cities. Industrial cities and provinces with travel time within an hour from the center of Ho Chi Minh City and Hanoi have their rents highly increased by 15-32% compared to the same period last year.

Last year, the industrial real estate market recorded the expansion and entry of new investors into the product line of ready-built warehouses and plants. Last year, the rent of warehouses and ready-built plants with modern standards recorded an increase of 5-17% over the same period. International investors actively expand their investment portfolio under the forms of land and property acquisition,  and joint ventures with domestic companies.

In 2022-2023, CBRE forecasts that the supply of industrial land will increase by more than 7,000 hectares for both northern and southern markets. Tier-2 industrial provinces will account for about 20-30% of the supply in the South and the North, respectively. Tier-2 industrial provinces with rapidly developing infrastructure will increase their strong investment attraction in the coming time. With a large amount of new supply in the next two years, the industrial land rental price will have a stable increase of about 4% per year after the explosive growth in 2019-2021.

Similarly, Savills has also reported an optimistic assessment of the prospects of the industrial real estate market in 2022. In a recently published report, Mr. Neil MacGregor, General Director of Savills Vietnam has foreseen that manufacturing plants of global companies starting to set up their business in Vietnam to invest in large-scale projects will create growth momentum for the industrial real estate market in the next 12-24 months.

According to CEO of Savills, in 2022, there will be growth in warehouse distribution and services of e-commerce and logistics to serve the domestic market due to Vietnam’s geographical characteristics with major cities all demanding for this distribution.

In the context of standout growth in the internet requiring a significant source to store data, data center segment will thrive.

Besides, cold storages also have links with e-commerce. Sellers on e-commerce sites have to find ways to store goods leading to an increase in demand for cold storage, which helps this market be dynamic. “In 2022, industrial and logistics real estate (logistics real estate) will continue to intensify greatly and be more sought after,” said Neil MacGregor.

(Source: vnExpress)