Readymade warehouses, factories lure significant foreign investment to Vietnam: Knight Frank
The market for ready-built warehouses and factories has experienced a fivefold increase in investor numbers since 2018, said Alex Crane, managing director of real estate consultant Knight Frank Vietnam.
Participating in a recent panel discussion at the Vietnam PropTech Summit 2023 in Ho Chi Minh City, Crane also highlighted divergent trends across the industrial real estate sector.
He said: "Capital values rates of operating assets” were experiencing downward pressure due to high financing costs, shorter land use terms, and the availability of comparatively cheaper locations across Asia."
Capitalization rates in Vietnam have increased, generally falling within the range of 9-12%, driven by a surplus of new, high-quality ready-built factories (RBF) and warehousing (RBW) nationwide. This market correction is reminiscent of the first-generation cycle witnessed in the office sector about 15 years ago."

Alex Crane, managing director of Knight Frank Vietnam, speaks at the Vietnam PropTech Summit 2023, December 14, 2023, Ho Chi Minh City. Photo courtesy of Knight Frank Vietnam.
Crane noted that the ready-built market for warehousing and factories has attracted significant foreign investment since 2018, with a fivefold increase in investor numbers.
He spoke of the challenges posed by this development boom, particularly in the greater HCMC area where ready-built warehousing supply stood at around 2.1 million m2, creating an occupier market with rentals averaging $4.5 and $4.7 per m2 per month for the southern and northern areas, respectively.
“While this trend was anticipated, it doesn't inherently pose a risk to the market; it simply keeps costs competitive for occupiers in the near term as the market matures and scales up to compete regionally, particularly against Thailand with its ready-built warehousing supply 2021-2024 CAGR at 6.6% compared to Vietnam's 15%,” Crane said.
According to the latest report released by Knight Frank, the industrial property market in Vietnam “remains robust with key factors emerging in 2024 that demand attention from investors and occupiers alike.”
Healthy industrial park (IP) occupancy rates in the major economic clusters of greater Hanoi and HCMC at 78% and 92% has "contributed to significant land price growth of 14% and 58% in both areas, respectively, from 2022 to 2023."
Crane also addressed the impact of the global minimum tax and higher logistics costs on attracting new manufacturers to Vietnam. Despite multiple free-trade agreements, rising labour and construction costs were eroding Vietnam’s cost advantage, he said.
This shift was evident in land prices, with greater Bangkok boasting industrial land prices of $82-164 per m2 per lease term, now lower than Hanoi's $80-250 and HCMC's $95-280 range.
“While industrial and manufacturing property in Vietnam will continue to be a significant segment, attracting new manufacturers and filling ready-built facilities will present challenges in 2024,” Crane said.
The Knight Frank report was optimistic about long-term prospects, citing a GDP growth forecast in the range of 4.7% to 5% for 2023 from the IMF and HSBC. It noted that Vietnam's commitment to infrastructure spending was among the strongest in the region, and the data centre market was poised for transformation, contingent on regulatory challenges being eased.
Crane noted: "We made many of these predictions in early 2022, and they are mostly playing out as expected.
"The ongoing consolidation among developers and investors in industrial and logistics real estate, while challenging for occupiers as fewer landlords means less competition, is a trend that will unfold over many more years, presenting good opportunities for inbound investors and occupiers in the near and mid-term, especially when consulting with the right independent real estate partners."
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