Industrial land rental in HCMC sets new peak in 2022

Rent of industrial land in the southern economic hub of Ho Chi Minh City reached $300 per square meter per lease period at the end of 2022, the highest in southern Vietnam.

A report by real estate services firm CBRE Vietnam showed that industrial real estate was a bright spot of the property market in 2022 as it saw continued interest from global manufacturers, especially those operating in the electronics and energy fields. Some big names like Apple, Quanta, Samsung and LG, committed investments of up to billions of U.S. dollars in Vietnam in the near future.

In Vietnam’s southern region, the average land rent increased by 8-13% year-on-year to $166 per square meter per lease period in 2022, about 38% higher than the average of the northern region. Rent can reach up to $280-300 per square meter per lease period at prime locations in HCMC, and neigbouring Binh Duong and Long An provinces.

Similarly, a Savills Vietnam report indicated that by the end of 2022, the highest rent for industrial land reached $300 per square meter per lease period in HCMC and nearly $180 in Long An and Binh Duong. Industrial land rent in these southern industrial hubs have continuously set new peaks in recent years.

In addition to the increasingly limited land bank, another factor driving the increase in industrial land rent in southern Vietnam is the improved transport infrastructure for better inter-regional connectivity. Of this, the HCMC-Trung Luong-My Thuan Expressway was put into use in 2022, while the construction of the Dau Giay- Phan Thiet Expressway and the My Thuan-Can Tho-Bac Lieu Expressway is expected to complete in 2023; and Nhon Trach Bridge, scheduled for 2025.

The reopening of China, the world's second largest economy, is hoped to boost Vietnam's economy.

Although supply chain disruptions have eased, companies are still seeking more supply sources and production locations to reduce risks. For instance, Chinese electric vehicle maker BYD Auto had plans to build an auto part factory in Vietnam to reduce its dependence on China and enhance its supply chain in Southeast Asia as part of its global expansion strategy.

Regarding the industrial real estate market outlook in the next two years, Thanh Pham, associate director of research and consulting services at CBRE Vietnam, said that the land rental is expected to jump 7-10% per year in HCMC, Dong Nai, Binh Duong and Long An; and 5-7% in Binh Thuan, Ba Ria-Vung Tau, Binh Phuoc and Tay Ninh provinces.

Meanwhile, the abundant supply of ready-built factories and warehouses will put pressure on rent, which have reached their peaks and are expected to go flat in 2023-2024.

Amid the high industrial land rent in manufacturing centers, investors will look to distant locations with more affordable prices like Binh Phuoc, Binh Thuan, and Can Tho. Industrial parks also need to pay more attention to improving customer service quality, especially those related to the environment and sustainable development.

The rent of industrial real estate in Vietnam in 2022 went up 10% year-on-year to an average $100-120 per square meter per lease period, according to the Vietnam Association of Realtors.

The country’s planning now features 563 industrial parks, of which 397 were established, 292 are operational and cover 87,100 hectares (58.7 hectares of industrial land), and 106 industrial parks of 35,700 hectares (23.8 hectares of industrial land) are under construction.

The occupation rate reached 80%, of which the southern province of Binh Duong with 29 industrial parks had the highest figure in the country at 95%.

Industrial parks and economic zones in Vietnam have so far attracted 10,000 domestic and 11,000 foreign investment projects, with a total registered capital of $340 billion, according to the association.