Northern industrial land rental prices continue to increase in the first quarter

According to a recent report by CBRE, a unit specializing in providing consulting and investment management services, the industrial real estate market had a positive growth in the first quarter of the year.

In the North, industrial land rental prices in tier 1 markets such as Hanoi, Hai Duong, Hai Phong, Bac Ninh, and Hung Yen increased by 3.7% year-on-year, reaching an average of 139 USD per square meter (about 3.6 million VND per square meter) for the remaining term. This increase was concentrated in industrial parks with good occupancy rates, causing investors to adjust rental prices.

The absorption rate of industrial parks in the North reached nearly 80% with about 200 hectares, a slight increase compared to the same period last year. The first quarter of the year recorded many projects starting construction such as the Lite-On electronic components factory in Quang Ninh worth 690 million USD or the Victory Giant Technology factory in Bac Ninh with a total investment of 540 million USD.

In the ready-built warehouse market, rental prices also increased by 2.3 - 2.6% year-on-year, reaching 4.7 - 4.9 USD per square meter per month. Warehouse occupancy rates reached over 80%. CBRE said that logistics companies led the demand for ready-built warehouses in the North, followed by electronics and sports equipment manufacturers.

The above developments were also noted by service firm Cushman & Wakefield. The firm said that some key industrial parks in the North have increased their rental prices by 4-5%, leading to an increase in the average rental price of the market. Demand for industrial land rental mainly comes from the electronic components and machinery manufacturing industries.

The increase in industrial land and warehouse rental prices is driven by FDI attraction as well as the manufacturing sector, according to Ms. Nguyen Hoai An, Senior Director of CBRE Hanoi. She cited the industrial production index in the first quarter increasing by more than 2% compared to the same period last year.

At the same time, the total registered foreign investment capital in Vietnam reached nearly 11 billion USD, an increase of more than 34% compared to the same period last year. Foreign capital poured into real estate alone reached nearly 2.4 billion USD, an increase of 46% compared to the same period. This promoted positive developments in the northern industrial land leasing market, which has advantages in location, improved infrastructure and positive market sentiment.

Despite a positive first quarter, the industrial real estate market may face many challenges when the US imposes a 46% reciprocal tax on Vietnam in the coming time (this tax is temporarily suspended for 90 days). Experts said that industrial park infrastructure as well as trade, services and housing will be directly affected when foreign capital flows decrease, causing experts and high-income workers from foreign enterprises to reduce their demand for renting and buying.

Mr. David Jackson, General Director of Avison Young Vietnam, said that if the tax is applied, it will cause anxiety for FDI enterprises operating in Vietnam in the short term. Instead of expanding investment, they will tend to delay and observe the situation.

However, Avison Young experts still expect FDI investors to have a backup plan and long-term vision. Lessons from the Covid-19 pandemic have helped many businesses be more cautious in inventory management and output control to avoid order disruptions when logistics costs skyrocket.

Sharing the same view, Ms. Nguyen Hoai An said that in the long term, Vietnam still maintains its advantages and potential with FDI investors. This advantage comes from the State's active reforms to streamline the apparatus, simplify investment procedures and invest in a series of large projects such as the North-South expressway and the Hai Phong - Hanoi - Lao Cai railway.

To maintain its attractiveness to foreign investment, according to Ms. An, Vietnam needs to focus on improving infrastructure in terms of connecting roads, industrial park power grids, improving labor quality, and having more preferential policies.