Real estate in the southern industrial zone lacks new supply, rents rise

According to VNDirect's report for the last 6 months of 2023, "?Sufficient sunshine, flowers will bloom " of VNDirect, both the North and South?industrial zone real estate?markets?are undersupply.

Limited supply

The southern market continued to witness a quarter of new supply scarcity, with no new projects coming into operation in the first quarter of 2023.?Total industrial park land area increased by 5.3% y/y and remained unchanged from the previous quarter at about 41,950 ha, of which 66.6% is leased area, about 27,950 ha.

"With high demand while new supply is in short supply, 5 key industrial provinces and cities in the South share the same growth scenario in both rents and occupancy rates," the report emphasized.

Accordingly, the average rent and occupancy rate increased by 21.8% year-on-year to $185/m2/lease term and 0.5 percentage points over the same period to 87%.?Currently, Dong Nai continues to maintain its leading position in rent growth in the first quarter of 2023.

Meanwhile, the warehouse segment in the South market welcomed a large amount of new modern supply in the first quarter of 2023, about 164 million m2 coming from the launch of a number of projects such as BWID Tan Dong Hiep B and SLP Park Long. Xuyen.?Total warehouse supply increased by 33.2% y/y to 4.04 million m2, of which 49.5% is modern supply.

The ready-built factory segment in the Southern market witnessed a strong increase with more than 0.21 million m2 of new supply in the first quarter of 2023, bringing the total supply to about 5.02 million m2.?Dong Nai and Binh Duong contributed the most to new supply in the first quarter of 2023, accounting for 45% and 32% respectively.?Although a large amount of new supply was put into operation in the first quarter of 2023, the average rent of ready-built factories remained unchanged from the previous quarter at USD 4.75/m2/month and occupancy rate decreased by 0 0.8 percentage points down to 82.4%.

As for the Northern market, after an impressive increase in the fourth quarter of 2022, no new supply was put into operation in the first quarter of 2023.?Total land area increased by 6.5% YoY and remained unchanged QoQ at 16,915 ha.?The total leasable area was stable at 11,923 ha, accounting for 70.5% of the total land area.?Hai Phong still maintains its leading position in the Northern market, accounting for 29.1% of the total land area.

Similar to the South, the lack of new supply has boosted the operation of all the northern provinces.?While the average occupancy rate continued to improve with an increase of 1 percentage point QoQ and 0.3 percentage point YoY to 80%, the average rent rose to a new high of $131/month. m2/lease term.?VNDirec?t finds that Hung Yen is a bright spot with the highest rental rate increase of about 16% over the same period to 117 USD/m2/lease term in the first quarter of 2023 in 5 key northern provinces and industrial cities. .

All new warehouse supply in the first quarter of 2023 came from modern supply, about 131 million m2 welcomed in the North market, with notable projects such as Vietlog, Logis United and SLP Nam Son Hap Linh.?Leading to a total warehouse supply increase of 40.3% over the same period at the end of the first quarter of 2023.?As the leading logistics center in the North and with a prime location next to Hanoi, Bac Ninh continues to dominate the warehouse market, accounting for 43.5% of the total supply.

With ready-built factories in the North market, the total supply increased by 4.6% over the same period to 2.37 million m2 thanks to the operation of SLP Park Yen Phong project, contributing about 0.068 million m2.?The average rent increased 2.9% year-on-year to $4.85/m2/month.?With only one project added in the first quarter of 2023, Bac Ninh continued to consolidate its leading position in the Northern market, accounting for 38% of the total supply.

2 shifting trends

In the above report, VNDirect believes that the industrial park real estate market will experience a difficult time in implementing new projects, leading to a shortage of supply until the end of 2023.

For the southern market, after the supply boom in the first half of 2022, no new supply has been put into operation.?Therefore, the southern market will go through a difficult period to deploy new projects in 2023.

After that, the new supply for the period 2024 - 2027 is also quite limited, about 1,388 hectares.?Some notable projects in the future will mainly come from large industrial park developers such as Cay Truong Industrial Park and Nam Tan Uyen Industrial Park expansion.

In the Northern market, although there are many projects waiting to be approved, the lack of new supply in the Northern market will last at least until the end of 2023. After that, about 3,757 hectares of industrial park land expected to be put into operation in the period 2024 - 2026, with the largest supply coming from Hai Phong, Vinh Phuc and Bac Ninh.

According to VNDirect, limited supply will shape two shifting trends in the near future.?Firstly, investors are gradually turning their attention to the secondary market with great advantages.?The tier 2 market is offering more competitive rates thanks to the relatively large difference between the tier 1 and tier 2 rental rates in both the South and the North at the end of Q1/2023.

While the tier 1 market has a rather limited available land fund, the tier 2 market has an abundant available land for rent, leading to a slower increase in rental prices in the tier 2 market. Level 1 for at least the next 3 years.

In addition, the available land bank in the secondary market offers more options for tenants, especially when traffic connectivity is increasingly improved.?In addition, labor costs in the tier 2 market are also lower than in the tier 1 market.

Along with that, the connectivity between tier 2 markets and tier 1 markets has been improved thanks to an upgraded infrastructure network.?Therefore, more and more large investment projects are pouring into the secondary market.

The second is the proliferation of multi-use multi-storey warehouses that will replace simple warehouses.?Currently, Vietnam's e-commerce revenue is booming, estimated at $39 billion with a compound growth of 25% in the period 2021 - 2026.

“For every $1 billion in e-commerce sales, an additional 92,903 square meters of warehouse space are needed.?From there, it is expected that more than 2.2 million m2 of warehouse space will be needed exclusively for e-commerce by 2026”, VNDirect forecast.

Traditional ready-built warehouses and factories can no longer meet demand when e-commerce booms.?Multi-use warehouses are a better option for limited space because they take up less land and increase storage space.?The growth of e-commerce and the desire for fast, efficient delivery to consumers, will be suitable for multi-use warehouse development.

The report shows that the positive factors supporting the industrial real estate industry are fading, coming from the challenges that gradually appear.?Specifically, the industrial park real estate market will witness a scarcity of new supply in 2023 when the approval procedure is delayed due to legal problems.?At the same time, Vietnam's competitiveness in attracting FDI is gradually weakening compared to other countries in the region.

In that difficult context, VNDirect believes that the industrial park real estate market will be reshaped by new trends that only developers possessing the following characteristics can turn challenges into opportunities. festival.

Source: Thuonggiaoonline