The Southern Industrial Real Estate Boom: Q3 2023 Insights
The industrial real estate market in Southern Vietnam has witnessed a remarkable transformation in the third quarter of 2023, marked by extraordinary growth and heightened demand. With a rental area that soared to 143,000 square meters—an increase of 2.4 times from the previous quarter—investors and businesses are taking notice. This surge not only reflects a vibrant market but also underscores the strategic positioning of Vietnam as a magnet for foreign direct investment (FDI).
A Surge in Demand
According to Cushman & Wakefield, the demand for ready-built factories and warehouses in the southern territories is incredibly diverse, encompassing various sectors, including textiles, chemicals, and electronics. As industries expand and modernize, they seek out these industrial spaces, highlighting a growing trend toward industrial diversification. This eclectic demand has reinvigorated the market, paving the way for a dynamic real estate landscape.
Leading Locations
In the race for industrial space, provinces like Dong Nai, Binh Duong, Ba Ria – Vung Tau, and Long An have emerged as frontrunners, recording the highest absorption rates for factories for rent. Dong Nai has taken the lead, accounting for nearly 60% of total market absorption. Such dominance indicates a highly competitive environment where businesses are eager to establish their operations in well-equipped industrial parks.
Occupancy Rates and Rental Dynamics
The occupancy rates for industrial factories and warehouses in the southern region have reached an impressive 74%. Meanwhile, average rental prices hover around $4.7 per square meter per month. High-demand areas like Dong Nai and Ba Ria – Vung Tau have experienced annual rental growth of approximately 2.5%. This upward trend in rental pricing illustrates the increasing value placed on industrial space, showcasing the attractiveness of these regions for businesses seeking to scale.
Infrastructure Development
As demand for industrial spaces escalates, companies focusing on industrial park infrastructure are reaping the rewards. Notably, Sonadezi Corporation reports a staggering warehouse occupancy rate of 92% across its managed industrial parks. This high occupancy has attracted around $130 million in FDI and approximately 720 billion VND (about $29.7 million) in domestic direct investment (DDI).
Land Utilization in Dong Nai
Dong Nai’s infrastructure development is particularly noteworthy. With 33 industrial parks leasing a total of 6,024 hectares, the province has nearly reached 86% of its available rented land. By November 2023, Dong Nai had attracted $1.037 trillion in FDI and over 2.64 trillion VND in DDI, surpassing its set targets by significant margins of 48.2% and 32.15%.
New Projects in Ba Ria – Vung Tau
Ba Ria – Vung Tau is also making headlines, successfully luring $751 million in FDI from new projects, alongside $503 million from capital-added initiatives. These figures represent staggering increases of 2.78 times and 15.3%, respectively, compared to the same period last year. Such growth indicates an upward trajectory that positions Ba Ria – Vung Tau as a critical player in the Southern industrial real estate scene.
Future Supply Forecast
Looking ahead, the total supply of industrial factories and warehouses in the southern region is predicted to increase by about 2.5 million square meters by 2026. This anticipated growth is crucial, particularly as the availability of industrial land for lease continues to dwindle. Such expansion could provide much-needed relief in meeting the demands of a rapidly evolving industrial landscape, while also serving as a new motivation for investors and businesses alike.
In summary, the Southern industrial real estate market is charged with energy and potential in the third quarter of 2023. With a confluence of heightened demand, strategic investments, and a positive growth outlook, this region stands at the forefront of Vietnam’s industrial expansion. Each of these trends signals a clear message: the South of Vietnam is not just a thriving market but a beacon for future industrial endeavors.