The Surge in Industrial Land Rentals in Southern Vietnam
Author: Thanh Khe
Thu, May 19, 2022 | 2:01 PM GMT+7
Industrial land rentals in southern Vietnam have reached unprecedented heights, driven by a surge in foreign direct investment (FDI) and a growing demand for production expansion. This trend highlights Vietnam’s significant economic recovery post-pandemic and its attractiveness as a destination for international manufacturing.
Record High Rentals
According to the latest report from Jones Lang LaSalle (JLL), industrial land rentals in southern industrial parks are averaging $120 per square meter for the entire lease cycle, reflecting a 9% increase compared to the previous year. This spike has set new records, underscoring the intensified competition among businesses looking to establish or expand their operations in the region.
Influencing Factors
Several factors contribute to this increase in rental prices. The reopening of Vietnam’s economy has spurred a new wave of FDI, with enterprises keen to ramp up their production capabilities. This demand for space has not only driven prices upward but also resulted in numerous new projects becoming operational, thus increasing the available land supply significantly.
The first quarter of this year reported substantial growth in the market, with approximately 26,724 hectares of available land for industrial parks and 3.8 million square meters of ready-built factories, according to JLL.
Notable Developments
Among the pivotal projects contributing to this land rush is the third Singapore-backed industrial park, VSIP, which began construction in Binh Duong in March. Additionally, the Amata Long Thanh Industrial Park recently secured a 42-hectare land lease in Dong Nai province. These developments signal not only a revitalization of interest in industrial investments but also highlight the strategic positioning of Vietnam as a manufacturing hub in Southeast Asia.
Ho Chi Minh City Dynamics
In Ho Chi Minh City, industrial land rentals have reached an average of $190 per square meter, with a commendable occupancy rate of 90%. The Tan Thuan Export Processing Zone, with its 204 hectares of leased area, stands out with a staggering average rental of $270 per square meter. It is noteworthy that most industrial parks in the city—17 out of 20—boast rental prices exceeding $120 per square meter.
The market dynamics have prompted investors to explore satellite areas due to land scarcity and escalating real estate prices in Ho Chi Minh City. Consequently, industrial land rental prices in neighboring regions like Binh Duong and Dong Nai have consistently grown by 8-9% in recent years.
The Growth Potential of Industrial Real Estate
Experts, including those from Savills, regard industrial real estate as one of the most promising segments of the property market, particularly during the pandemic. With increasing rents and high occupancy rates, this sector demonstrates strong growth potential, driven in part by a booming e-commerce industry across major cities.
John Campbell, head of industrial services at Savills Vietnam, remarked on the momentum within the market, noting that the full reopening of international air routes has enabled manufacturers to engage directly with projects and finalize lease agreements. This accessibility will undoubtedly enrich the land leasing market concerning industrial parks, factories, and logistics facilities.
Looking Ahead
The outlook for Vietnam’s industrial park market remains optimistic. As foreign investment continues to pour in, the landscape of industrial land rental is poised for significant growth in 2022 and beyond. The combination of rising demand, expanding infrastructure, and advantageous economic conditions presents a compelling narrative for investors eyeing opportunities in Southern Vietnam’s burgeoning industrial sector.
This exploration into the dynamics of industrial real estate in Southern Vietnam illustrates not only the current trends but also the promising future that lies ahead for both investors and the nation.