Vietnam – 12 October 2021 –

Vietnam Industrial Market

The continuous waves of COVID-19 have challenged the Vietnam industrial market in Q3 2021, and heavily impacted the Southern region. In July, Directive 16 was applied in HCMC, Binh Duong, and Dong Nai that nearly frozen the inter-province transportation of labour force and goods. From what was experienced in Bac Ninh, the government and manufacturers adjusted their plan frequently to maintain the production and safety of the labour force during this challenging period.

Solutions such as “3 on the spot”, “1 route 2 destinations”, prioritize vaccine for workers in the industrial park, material truck drivers and shift work to reduce the number of workers at the same time helped maintain production.
Despite difficulties in maintaining business continuously, landlords actively support tenants by extending the payment term, facilitating the document process for the tenant to get COVID-19 tests, and vaccinating. Landlords also consider case by case to support rent and management fee reduction.

Average occupancy rates of existing industrial parks in five key Northern industrial cities and provinces (Hanoi, Bac Ninh, Hung Yen, Hai Duong, and Hai Phong) reached 78.5%, a 0.5 ppts increase y-o-y in Q3 2021. Similarly, the occupancy rate of four key Southern industrial cities and provinces reached 87.2%, a 0.2 ppts increase y-o-y. Regarding transactions recorded in 9M 2021, the sizes of land lease transactions are between 3ha to 25ha. The most common land size is between 3ha and 5ha, with demands from the furniture and electronics manufacturing, logistics, and packaging industries.

In Q3 2021, demand for industrial land and warehouse/ready-built factory slightly declined because of the impact of COVID-19 on inter-provincial travelling and international flights. CBRE expects the market will become active again after restrictions are gradually lifted in Q4 2021. Thanks to the high occupancy rate, despite the impact of the pandemic, average industrial land asking rents remained stable in major industrial provinces.

The scarcity of assets in prime locations in Hanoi and HCMC has prompted many occupiers to search for places in satellite cities to enjoy proximity to large populations and relatively cheaper rent. The connections between HCMC and Hanoi to their nearby regions are gradually improved thanks to infrastructure projects under construction, such as Trung Luong – My Thuan, Dau Giay – Phan Thiet in the South; Van Don – Mong Cai expressway, Ninh Binh – Hai Phong in the North.

Performance of Warehouse/Ready-built factory remained stable due to significant supply coming into operation since 2019 and delays in leasing activities due to travel restrictions in 2021. The strong growth of e-commerce and logistics companies since the outbreak of COVID-19 has spurred demand for storage space and distribution facilities. According to CBRE's Asia Pacific Logistics Occupier Survey, facilities serving metropolitan populations are keenly sought after, with warehouses in satellite cities, urban warehouses, and in-city delivery stations serving last-mile delivery among the most popular.

With drastic changes during the pandemic, Vietnam’s industrial real estate market became an attractive opportunity for domestic and international investors. Recent difficulties showed the need to diversify the supply chain, expanding warehouses, especially cold storage for food and agricultural products. Expansion of existing businesses and construction of production facilities amid accelerating supply chain relocation will be the primary drivers of demand in the coming years.

Ms. Thanh Pham, Associate Director of CBRE Vietnam, Research & Consulting Services, commented on the market outlook:  “Short-term difficulties will soon be resolved, the market will maintain strong growth momentum in the long-term with expansion plans of foreign companies operating in Vietnam. According to our latest occupier survey, Vietnam is an important market for industrial and logistics developers and tenants in the next three years. In addition, additional factors such as sustainable production and environment, social and governance (ESG) standards are being evaluated carefully when developing new factories.”

Industrial park developers are quickly responding to occupiers' changing requirements. They have applied modern technology to the management and operation of the facility, provided service packages, including legal, human resources, to help customers save time and costs during project implementation. Virtual reality technology is also applied to introduce factory and industrial land to help customers experience products online, as a site visit is yet to be available.

Note:

• Asking rent of industrial land and Warehouse/Ready-built factory does not include VAT and Management fee.
• Asking rent of industrial land is calculated for the remaining lease term of a project (which is usually from 30 to 45 years).