Demand for industrial land rising: Savills Vietnam

The sudden increase in demand for land, factories, and warehouses in Vietnam has pushed up rental costs at industrial parks (IPs) near major cities, according to Savills Vietnam.

Rising rents and high occupancy rates at key IPs in the north and the south may be cause for concern at multinational corporations looking for locations close to Hanoi or Ho Chi Minh City, said Savills Vietnam Industrial Services Manager John Campbell.

Industrial real estate has enjoyed positive gains in both rental rates and occupancy rates despite the COVID-19 pandemic.

Savills Vietnam data shows that demand for industrial real estate has been rising since 2018, leading to a shortage.

Average occupancy rates at IPs were high in 2020. In northern areas they stood at around 90% in Hanoi, 95% in Bac Ninh, 89% in Hung Yen, 82% in Hai Duong, and 73% in Hai Phong. In the south, they were 88 percent in HCM City, 79% in Ba Ria-Vung Tau, 84% in Long An, and 94% in Dong Nai. Most notably, in Binh Duong the average was 99%.

Matthew Powell, Director of Savills Hanoi, attributed the market vibrancy and spike in demand for land to better infrastructure and the ability to access roads, ports, and airports.

As the demand - supply gap widens, prices are moving up, Savills Vietnam said.

In HCM City, leases in IPs have reached US$147 per sq.m and US$123 per sq.m in Long An. In Hanoi they are up to US$129 per sq.m and US$95 per sq.m in Bac Ninh, it noted.

If prices continue to rise, Vietnam’s competitiveness in terms of price will be weakened unless there is more new supply, Campbell warned.

According to the Ministry of Planning and Investment, Vietnam has 284 operating IPs and another 86 under construction.

Savills’ experts said infrastructure at IPs needs to be improved, while policies and management mechanisms should be finalised to improve operational efficiency.

This is especially necessary for Vietnam to attract more waves of investment relocating from elsewhere.