### Rising Rental Rates in Vietnam’s Industrial Land Market
Vietnam’s industrial real estate landscape is on the verge of a notable transformation. Experts predict that rental rates for industrial land will see a gradual increase in the coming years, owing to various economic factors and developments in international relations. According to CBRE, a global leader in real estate services, the rise in rental prices is expected to be around 3-9% per year in the North, while the South may experience increases of 3-7% annually over the next three years.
### Influencing Factors Behind Rental Increases
The anticipated rise in costs for industrial land can be attributed to several dynamic elements. Chief among them is the strengthening of Vietnam’s diplomatic ties with major global economies. This has led to increased interest from foreign investors, thereby boosting the manufacturing and industrial real estate sectors. An Nguyen, senior director and head of CBRE Vietnam in Hanoi, emphasizes the importance of improving infrastructure—such as road connectivity, power grids, and industrial zones—to maintain Vietnam’s attractiveness as an investment destination.
### Positive Trends in Manufacturing
The first quarter of 2024 showcased promising signs for the manufacturing sector in Vietnam. Exports and imports witnessed year-on-year growth rates of 17% and 13.9%, respectively. Notably, processed and manufactured industrial goods accounted for a staggering 88.1% of the total export turnover. This robust performance indicates a growing economic foundation that bolsters demand for industrial real estate.
### Current Rental Landscape in Northern and Southern Regions
In the northern region, industrial land rental rates saw a slight elevation of 1.2% on a quarter-on-quarter basis and a 7.8% increase year-on-year, averaging $133 per square meter. Conversely, in the southern tier 1 markets, these rates remained stable at $189 per square meter, demonstrating a year-on-year growth of 2.4%. This stability in the southern market is notably attributed to the lack of new industrial parks being introduced during this quarter, despite the ongoing interest from new tenants.
### Occupancy Rates and Absorption Areas
The continuous demand for industrial land has led to a remarkable increase in occupancy rates. The northern region’s occupancy rose to 83%, while the southern market maintained a high rate of 92%. In the northern tier 1 markets, the absorption area hit nearly 110 hectares in the first quarter, highlighted by significant transactions like the 10-hectare Victory Giant Technology factory project in Bắc Ninh Province. In contrast, the southern area saw an absorption rate of just over 20 hectares.
### Expansion Beyond Tier 1 Markets
With increasing constraints in tier 1 markets, both domestic and international manufacturers are eyeing tier 2 regions, such as Bà Rịa-Vũng Tàu and Tây Ninh. These areas are appealing due to their comparatively abundant industrial land supply and competitive rental prices. This shift may serve as a long-term strategy for manufacturers looking to optimize operations while keeping costs manageable.
### Developments in Ready-Built Warehouses and Factories
The ready-built warehouse and factory markets in northern Vietnam experienced a boost with the launch of several large-scale projects, primarily concentrated in Bắc Ninh. However, the average occupancy rate for these facilities has decreased slightly to 70% for warehouses, while remaining steady at 87% for factories. The average rental prices for ready-built warehouses and factories in tier 1 markets reached $4.7 and $4.9 per square meter per month, respectively.
### Specific Trends in High-Tech Manufacturing
High-tech manufacturers have played a significant role in driving demand for industrial spaces. Companies involved in semiconductor production and motor technology, like VDL and Tecnotion from the Netherlands, are expanding their operations within the Vietnamese market. This aligns with the broader interest in sectors that promise sustainable growth and innovation.
### Southern Market Stability Amidst Limited Supply
In the southern market, despite the absence of new supply in recent quarters, existing projects have benefited from this scarcity. The rental prices for ready-built warehouses and factories remained stable at $4.6 and $4.9 per square meter per month. Year-on-year growth rates were recorded at 2.2% for warehouses and 3.9% for factories, demonstrating the resilience of the market amidst fluctuating supply conditions.
### The Broader Context of E-Commerce and Renewable Energy
The demand for ready-built warehouses and factories in both northern and southern regions is increasingly drawn from sectors like renewable energy and e-commerce. Companies such as JiaWei from Taiwan and Shopee from Singapore are actively expanding their footprints in Vietnam, highlighting the country’s strategic importance in the global supply chain.