Severe scarcity of land supply for industrial real estate

According to CBRE, as of the third quarter of 2020, the total land area of ​​industrial parks in the five main industrial cities and provinces in the North, including Hanoi, Bac Ninh, Hung Yen, Hai Duong and Hai Phong, reached 13,800 hectares, with 9,600 hectares of industrial land for lease. The average occupancy rate ofindustrial parkmaintained at a positive level of 79%. Of which, industrial parks in Hanoi, Hai Duong and Bac Ninh achieved an average occupancy rate of about 90%.

For the Southern market, the total industrial land area is double that of the Northern market, reaching about 38,000 hectares, of which 24,000 hectares of industrial land is for lease, including Ho Chi Minh City, Binh Duong, Long An, Dong Nai, Ba Ria-Vung Tau with an average occupancy rate of nearly 77%.

Illustration

WILL VIETNAM WELCOME A WAVE OF IMMIGRATION IN 2021?

CBRE emphasized that the Covid-19 pandemic and trade tensions have disrupted the global supply chain, and Vietnam is one of the destinations attracting investors from companies with production lines in China.

However, this trend is being disrupted by the US presidential election, with the Biden administration expected to make drastic changes in economic policy, such as easing tensions with China and rejoining the CPTPP. Some companies interested in moving to Vietnam are waiting to determine US policy under the new president to take appropriate steps.

Savills experts also said that demand continues to exceed supply with occupancy ratesindustrial real estatereaching 76% nationwide, the demand for this segment is huge in key industrial provinces.

Most of the leasing transactions in the first 6 months of 2020 originated from projects and negotiations that took place in 2019, while many leases were also made from companies already in Vietnam and looking to expand production.

It is expected that in 2021 and 2022, manufacturers will move out of China, which is an opportunity for investors to launch more projects to catch up and meet high-value manufacturing investments.

“The final quarter may see investors and tenants trying to quickly complete negotiations and reach bilateral agreements with real estate developers to lock in the most favorable prices, while developers can still be flexible in negotiating amid the pandemic.

If flights are put into operation in the first 6 months of 2021, land, factory and warehouse rental prices may increase, forcing investors to lock in prices as soon as possible,” emphasized Mr. John Campbell, Manager of Industrial Real Estate, Savills Vietnam.

SERIOUS SCARCITY OF READY-TO-HANDOVER LAND SUPPLY

The demand for industrial real estate is high in the near future, however, according to CBRE experts, “the supply of industrial land ready for immediate handover in industrial parks in both regions is in a state of scarcity”. This is a disadvantage of Vietnam’s industrial real estate and needs to be overcome to facilitate the flow of capital into Vietnam.

Mr. Dang Van Quang, Director of JLL Vietnam, also said that the land fund for industrial park development in Vietnam is very limited, and the land fund with good traffic infrastructure is even more limited. If we want to acquire land to expand industrial parks, we will also face barriers. With the current infrastructure system, it is feared that Vietnam cannot actually meet all the requirements of many large foreign investors.

Acknowledging the scarcity of land funds, Mr. Nguyen Van Dinh - Deputy General Secretary of the Vietnam Real Estate Association said that current resources in the market are only enough to serve and attract investors.FDI enterprisesunder normal conditions. If there is a massive wave of foreign investment into Vietnam in the coming period, I'm afraid it won't be enough.

Seaports are overloaded, traffic is congested. Although there is still land in economic zones and industrial parks, there is not enough room for development. "Recently, I took FDI business delegations to Bac Ninh and Bac Giang for a tour and found that there is not much industrial land left in the planning. Hai Duong, Thai Binh, and Nam Dinh are also scarce. Meanwhile, agricultural land and land for conversion of land use purposes are still vast but have not been included in the planning. This shows that our preparation is still lacking and weak, we do not have a reserve land fund to be ready to respond when FDI capital breaks out in Vietnam, just like our body, if we swallow a large amount of food at once, it is easy to get overeating," said Mr. Dinh.

The Deputy Secretary General of VnREA emphasized that if Vietnam wants to attract and absorb a massive wave of FDI, it first needs to have stronger investment in land and infrastructure. Synchronous infrastructure, convenient transportation, and low logistics costs are needed to convert agricultural land into industrial land, build industrial parks, and economic zones to attract investors to Vietnam.

Currently, industrial parks and economic zones are concentrated in large economic regions such as the North and the South, while the Central region is an area with weak industrial development. Therefore, Mr. Dinh believes that Vietnam can invest in and build infrastructure and seaports to attract FDI enterprises to this region.

According to a report by Savills, the Department of Economic Zones Management, Ministry of Planning and Investment has announced the approval of master plans for 561 upcoming industrial park projects with an area of ​​over 201,000 hectares. Of these, 259 zones using 86,500 hectares have yet to be established, accounting for 43.1% of the total new area.