Industry Snapshot – Industrial Property

Vietnam Industrial Property Industry

Market overview: The number of established industrial parks have mushroomed by nearly 7 times in the last 22 years from 61 in 2000 to 410 in 2022. At YE22, Vietnam had nearly 300 IPs operating with a stable average occupancy rate of 71.1% (+10 ppts YoY). Cumulatively, these IPs have attracted around 11,000 FDI projects with a total registered capital of approximately USD250bn and nearly 11,000 DDI projects with a total registered capital of nearly VND3,000trn.

During 2022, land leasing rates continued to be in an upward trend albeit at a slower pace given a decrease in registered FDI and a slowdown in global demand, as investors prefer to reserve cash for defense and delay their expansion/relocation plans. The northern market recorded an average land leasing rate of USD111/sqm/remaining leasing term (+0.9% YoY and +0.9% QoQ) while the south recorded USD126/sqm/remaining leasing term (+8.2% YoY and +0.9% QoQ). Occupancy rate was stable at 79.1% (-0.9 ppts YoY and -1.2 ppts QoQ) in the north and 85.6% (-4.4 ppts YoY and +0.4 ppts QoQ) in the south.

The same trend was seen in the ready-built factory market with an average leasing rate of USD4.84/sqm/month (+3% YoY and +1.5% QoQ) in the north and USD4.75/sqm/month (+0.3% YoY and -1.3% QoQ) in the south.  

Opportunities & Threats: There are numerous growth drivers: China+1 trend, China-Taiwan tension, relatively stable macroeconomic growth, large and affordable work force, competitive leasing rates, infrastructure development and FTAs. On the other hand, a slowdown in global demand, global minimum tax, manufacturing wage growth, land clearance and insufficient infrastructure may pose challenges to the market’s development.

Outlook: We have a positive long-term outlook for this sector given many opportunities mentioned above. Due to limited land area but stable demand from foreign companies, leasing rates are expected to continue to grow at a slower pace and occupancy rate may stabilize. For longer term, new supply locations will be moved further away from traditional areas as they offer more affordable leasing rates and have more large-scale areas available. There will be increasing demand for green and smart IPs, multi-floor industrial facilities in crowded locations and hybrid facilities that can convert between warehouse and factory to tailor to tenants’ demand.

* Our key stocks: KBC VN, IDC VN, SIP VN’s  2023 overviews included in full report