Southern industrial land rentals reach new peak

Industrial land rentals in southern Vietnam have reached a new record high as demand surges amid a new wave of foreign direct investment, according to consultancy firms.

Land rentals in southern industrial parks averaged $120 per square meter for the whole lease cycle in the first quarter of this year, up 9% year-on-year, according to a Jones Lang LaSalle (JLL) report.

The consultant attributed the surging prices to a new wave of foreign direct investment pouring into Vietnam following the country’s post-pandemic reopening, as well as enterprises’ rising demand to expand production.

Many new projects have come into operation, driving the land supply for industrial parks and ready-built factories to grow significantly in Q1, reaching 26,724 hectares and 3.8 million square meters respectively, JLL reported.

Notably, the third Singapore-backed industrial park VSIP embarked on construction in Binh Duong province in March, while Amata Long Thanh Industrial Park was earlier granted a 42-hectare land lease in Dong Nai province.

Colliers Vietnam reported that the rent of industrial land in Ho Chi Minh City averaged $190 per square meter for the whole cycle in Q1, with an occupancy rate of 90%.

Particularly, Tan Thuan Export Processing Zone in District 7, with 204 hectares of leased area and a 90% occupancy rate, led the city in terms of rent with an average of $270 per square meter a term.

According to Colliers, 17 of the 20 industrial parks in HCMC had an average rental price above $120 per square meter a term. North-West of Cu Chi, Hoa Phu Automotive-Mechanical, and Dong Nam industrial parks are among the remainder, with an average rental price of less than $120 and occupancy rates of at least 82%.

Land scarcity and surging real estate prices in HCMC have pushed investors to seek industrial land in satellite areas. Therefore, the annual rent growth among southern industrial capitals, namely Binh Duong and Dong Nai, has remained at 8-9% in the past few years, it said.

The consultant believed that industrial real estate related to factories, warehouses, and logistics, had high growth potential in 2022 thanks to fast-growing e-commerce in major cities.

In Savills’ view, industrial real estate is the brightest spot in the property market during the pandemic period, and also the segment with the most impressive growth momentum with increasing rents and a high occupancy rate in Q1.

The full reopening of international air routes allows manufacturers to directly examine projects, sign factory lease contracts, establish representative offices in Vietnam, and complete investment and business registration certificates.

This fosters rapid expansion in the land leasing market in terms of industrial parks, factories, and warehouses, said John Campbell, head of industrial services at Savills Viet Nam.

"The industrial park market is poised for a significant breakthrough in 2022 and beyond," he added.