HO CHI MINH CITY: New supply in the industrial real estate market in Ho Chi Minh City and neighbouring provinces has been slow amid an increase in demand from manufacturing industries during the peak year-end buying season before Tet (Lunar New Year).

       According to a report by Cushman and Wakefield, the industrial real estate market in the south, specifically key areas such as Ho Chi Minh City, Binh Duong, Dong Nai, Long An and Ba Ria-Vung Tau provinces, did not have any launches in the last quarter of 2023.

       The report also said that the net absorption of industrial land in the fourth quarter of 2023 was 84 ha, which showed that demand for industrial land is high.

       Ba Ria-Vung Tau Province accounted for 54% of the total net absorption area last quarter, thanks to two large investment projects in the electronics and chemical industries.

       Long An, Dong Nai and Binh Duong accounted for 17%, 16% and 12% of the total net absorption area, respectively.

       High demand but limited supply have caused industrial land rental prices to increase compared to previous years.

       The average primary rental price of industrial park land was recorded at US$173 per square metre per month, up 4% quarter-on-quarter and up 7.8% year-on-year.

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       With regards to ready-built factories in the south, Cushman and Wakefield said that the market welcomed a new ready-built factory (RBF) project in Dong Nai Province.

       RBF rent remained stable quarter-on-quarter, at US$4.70 per square metre per month, and increased 1.4% year-on-year.

       According to Cushman and Wakefield experts, demand for renting RBF projects this quarter comes not only from small and medium enterprises but also from large manufacturing companies.

       Due to limited industrial park land in some southern provinces, some businesses consider RBF as an alternative rental option thanks to lower investment costs.

       Dong Nai and Binh Duong, the two main RBF supply centres, respectively, accounted for 39% and 52% of the total net absorption area this quarter, with about 79,000 square metres.

       Meanwhile, the ready-built warehouse market is relatively abundant in supply. In the fourth quarter of 2023, the southern market welcomed a large new supply with an area of 280,000 square metres from two projects in Long An Province, including BW Xuyen A and Logos Long Hau.

       However, according to Cushman and Wakefield, demand from the manufacturing and export sectors have not yet recovered amid weak global demand and an unstable economic outlook.

       Therefore, rental demand in general mainly comes from domestic consumption to meet increased shopping demand before Tet. According to VNDirect Securities, limited supply will shape two shifting trends shortly.

       Firstly, investors are gradually turning their attention to Tier 2 markets that offer more competitive rates thanks to the relatively large difference between Tier 1 and Tier 2 rental rates, both in the north and south.

       In addition, the available land in Tier 2 offers more options for tenants, especially as traffic connectivity is increasingly improved. In addition, labour costs are also lower than in Tier-1, VNDirect said.

       Vietnam’s industrial parks are more appealing than those of rival countries in the area, largely because the local currency has depreciated less over the past year compared to those of Malaysia, Indonesia, and India. — Viet Nam News/ANN