Northern industrial real estate benefits from manufacturing growth
Northern region led by Hanoi appears to be one of the most attractive destinations for investors with favorable conditions.
Vietnam’s northern industrial real estate has rapidly changed with the establishment of sizable industrial parks in Hanoi and surrounding provinces, showing a successful example of the development of manufacturing industries.
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Vietnam has gathered momentum over the past few years to establish itself as the production hub for Southeast Asia and now offers a viable alternative for companies looking to establish their operations outside of China, according to Stephen Wyatt, country head of JLL Vietnam.
This is backed by a number of key fundamentals which include strategic location, business friendly environment and competitive labor costs, Stephen Wyatt said at a press conference recently held in Hanoi.
Indeed, the area of industrial land has surged to more than 80,000 hectares currently from about 335 hectares of land dedicated to industrial land in 1986 – the time when Vietnam began the Doi Moi (Rennovation).
It’s obvious that Vietnam has quickly become one of the brightest manufacturing hot spots in Southeast Asia, a phenomenal growth over the past two decades.
Performance in Q1/2019
Northern industrial market - Total supply. Photo: JLL Research
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In the first quarter (Q1) this year, the strong manufacturing growth resulted in healthy demand for industrial real estate in the Northern Key Economic Zone (NKEZ) led by Hanoi, and the provinces of Bac Ninh and Hung Yen, JLL’s executive stated.
The occupancy rate averaged at 72% across the top five most dynamic cities and provinces in the region.
Continuing to be the most desired destinations in attracting FDI investments amongst the northern localities, Bac Ninh and Haiphong possess sound fundamentals for further growth such as synchronized infrastructure system connecting major consumer markets, improved support and favorable business environment supported by manufacturing giants namely Samsung or LG.
Northern industrial market - Average rent. Photo: JLL Research
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The total leasable industrial land area in the five northern cities and provinces was 9,371 ha at the end of Q1. Of the figure, Haiphong and Bac Ninh were the northern industrial hubs by contributing 63% of the total supply.
In line with the strong FDI commitments into Vietnam recently, these provinces continued to improve their investment environments and develop subsequent phases of existing industrial parks (IPs) and new ones in favorable locations to meet increasing demand.
In terms of land prices, the rates in the region hit US$93 per square meter (sq.m) per lease term, an increase of 7.6% on year. Hanoi took the lead with US$138/sq.m per lease term thanks to its massive consumer market, well-established synchronous infrastructure system, and limited supply.
Monthly rents for factory space ranged from US$4 to USD 5/sq.m/month for a minimum lease term of 3-5 years. This rent level remained flat compared to the previous update time.
Northern industrial market - Future supply. Photo: JLL Research
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Outlook: Approximately 13,077 ha of land is set for industrial development in five cities and provinces in the north, of which Haiphong, Bac Ninh, and Hanoi accounted mostly.
Vietnam’s industrial properties still attract attention with strong FDI coming mostly from Japan, South Korea and Hong Kong and increasingly from China. The trend of manufacturers shifting out of China will continue to bolster the attractiveness of Vietnam’s industrial market.
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