Amidst the prevailing global uncertainty and growth slowing down, Vietnam’s economy still achieved stable growth with 6.76% in 1H19. The total foreign direct investment pledged to the country was nearly USD18.47 billion in 1H19, equivalent to 90.8% of the same period in 2018. Vietnam is also continuously expanding economic cooperation, evidently from the latest EU-Vietnam Free Trade Agreement which has just been signed at the end of June 2019. The effort is expected to enhance the attractiveness of Vietnam's industrial market, boosting demand for industrial real estate.
JLL’s most recent report on the potential of the Southern provinces in Vietnam highlights the characteristics that promise to be a platform for growth for the areas surrounding Ho Chi Minh City.
Binh Duong
Binh Duong Province possesses a strong economic foundation for industrial growth, with a synchronous infrastructure system and efficient administrative procedures to support businesses. Industrial land rent for a cycle is USD80/m2.
Stephen Wyatt, Country Head of JLL comments “plenty of job opportunities are being created by the rapid development of the industrial segment, especially the manufacturing industry. But the booming growth pace also lead to a serious shortage of manpower which has become a major hurdle for companies who are intending to set up production in Binh Duong.”
According to JLL, the flood of workers heading for Binh Duong boosted the growth in supply and rent price of apartments and offices in this province. Apartment supply reached over 24,000 units with the average selling price at USD939/m2. Landed houses supply reaches more than 4,500 units with an average selling price of USD1,374/m2. Office supply reached 48,400m2, average rent of USD11.5/m2/month.
Existing retail giants like AEON Mall, Lotte Mart and soon-to-finish Vincom Di An will continue to enhance the attractiveness of Binh Duong’s retail sector. For this reason, the rental price for retail space is 16.7USD/m2 for a total supply of 166,300m2.
Dong Nai
The shift of manufacturers from China to Vietnam is also one of the factors boosting demand for Dong Nai’s industrial land. The situation has pushed the average land price in the second quarter of 2019 to a new level of USD90/m2/lease term, up 15.8% over the same period.
There are only 2,424 residential units in the entire area, considerable update to the infrastructure system has pushed the average selling price to USD1,150/m2 and putting Dong Nai among Southern provinces with the most expensive residential price. Landed houses supply reaches more than 4,325 units with an average selling price of USD1,273/m2. Regarding the office sector, Dong Nai has ample supply and competitive prices, with 49,500m2 with an average rent of USD10/m2/month.
Large malls and retail centers in Bien Hoa city create a vibrant retail market with total supply of 121,850m2 for the rental price reaching USD16.5/m2/month.
Ba Ria – Vung Tau
The two main economic drivers of Ba Ria - Vung Tau have long been petroleum and tourism. The city is also making a move to boost investment in renewable energy segment, evident by the recent licensing of two major solar power plants. Industrial land rent is still affordable, with the average rent reaching USD67/m2/lease term.
Although the total supply of apartments in Ba Ria - Vung Tau totals to 11,126 apartments, for rent at the price of USD939/m2. Supply for landed houses reaches 1,220 units with an average selling price of USD1,658/m2. Office supply in Ba Ria - Vung Tau reached 24,600m2 with an average rent of USD8.9/m2/month.
Thanks to the tourism and the large workforce living in town, Ba Ria - Vung Tau owns a large retail supply of 139,100m2 with a high rental price, reaching USD14.7/m2/month.
Long An
Long An has recently emerged as another option for industrial investor besides two tradition choices that are Binh Duong and Dong Nai. Currently, the rental price of industrial park land in Long An has exceeded the USD100 threshold for each m2/lease term, which is also the highest rent growth rate recorded in the last quarter.
Potential industrial growth promises to bring a large amount of human resources to Long An, but currently there is no apartment supply in the province. The supply of landed houses reaches 3,352 units with an average selling price of USD1,368/m2. The residential sector could be an attractive investment area for investors who have the means to seize the opportunity.
Compared to the above-mentioned provinces, Long An has the lowest office supply, only 9,600m2 with the lowest rent at only USD4.3/m2/month. In the retail segment, Long An also possesses the lowest rent with only USD13.5/m2, and the total supply is 41,400 m2.
In Southern areas, investors are always actively looking for industrial and logistic assets, through joint ventures with local industrial developers and/or acquisition of land bank and operating assets. The lack of high specification, modern logistics warehouse space, and strong demand from regional occupiers are supporting the potential growth of this industry. Quality of the assets, rental growth, deal size and remaining land tenure are the key crucial factors for investors to determine their investment decisions, Stephen concluded.
