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Exciting industrial real estate scene in the North

Exciting industrial real estate scene in the North

JLL’s market report in Q1 2019 showed a strong growth in the industrial real estate sector with an impressive performances of the Northern regions, especially in Bac Ninh, Hai Phong and Hung Yen.
11:30, 23/04/2019
Demand of industrial real estate remained healthy thanks to strong manufacturing growth in Northern provinces/cities.

Demand of industrial real estate remained healthy thanks to strong manufacturing growth in Northern provinces/cities.

Vietnam’s FDI obtained new growth

The total FDI pledged to the country was nearly USD 10.8 billion in 1Q19, a significant increase at 86.2% over the same period last year. Specifically, there were 785 newly registered projects worth USD 3.82 billion, increased 80.1% y-o-y. The FDI disbrsement recorded at USD 4.12 billion, an increase of 6.2%.

Regarding the 18 investment industries, processing and manufacturing still being the most attractive sector, recorded at USD 8.4 billion and equivalent to 77.7% of total capital. The real estate and science activities sector followed as the second and third rank with USD 0.78 billion and USD 0.38 billion, respectively.

Hong Kong is the new rising country to take the lead with a total USD 4.4 billion investment amongst 74 countries investing in Vietnam, accounting for 40.7% of the FDI. Followed by Singapore with USD 1.46 billion and South Korea with USD 1.3 billion.

Healthy demand backed by strong manufacturing growth

The 1Q19 occupancy rate averaged at 74% across the top five most dynamic cities and provinces in Northern Key Economic Zone (“NKEZ”), led by Hanoi, Bac Ninh and Hung Yen provinces.

Remained to be the most desired destinations in attracting FDI investments amongst Northern cities/provinces, Bac Ninh and Hai Phong possesses sound fundamental for further growth such as synchronized infrastructure system connecting major consumer markets, improving provincial government’s support and favourable business environment supported by manufacturing giants such as Samsung or LG.

Northern industrial market report. (Source: JLL Research)

Northern industrial market report. (Source: JLL Research)

Supply remained strong

At of 1Q19, the total leasable industrial land area in the five Northern cities and provinces was 9,071 ha. Of which, Hai Phong and Bac Ninh played the key role as the industrial hubs in the North by contributing 63% of total supply. In line with the strong FDI pledged into Vietnam recently, these provinces continued to improve their investment environments and develop subsequent phases of existing Ips and new ones in favourable locations to meet increasing demand.

Land price continued to grow at a strong pace

The average land price in 1Q19 hit USD 92 per sqm per lease term, an increase of 6.5% y-o-y. Hanoi’s average price still took the lead with USD 138 per sqm per lease term, the highest amongst the Northern cities and provinces thanks to its massive consumer market, well-established synchronous infrastructure system and limited supply.

Monthly rent for factory space ranged from USD 4.0 to USD 5.0 per sqm per month for a minimum lease term of 3-5 years. This rent level remained flat compared to the previous update time.

Outlook

Approximately 13,604 ha of land is set for industrial development in five cities and provinces in the North, of which Hai Phong, Bac Ninh and Hanoi accounted mostly.

Vietnam’s industrial properties still attract attention with strong FDI coming mostly from Japan, South Korea and Hong Kong and increasingly from China. The trend of manufactures shifting out of China will continue to bolster the attractiveness of Vietnam’s industrial market.

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