Future industrial expansions in HCMC will make up for lack of suppy
According to Colliers International, among the Southern provinces, Ho Chi Minh City leads the market in industrial rent, at approximately 123.8 USD/sqm/term for industrial land lease, and around 4.3 USD/sqm/month for factory lease.
At the end of 2018, there were 18 industrial parks in Ho Chi Minh City, providing approximately 3,700 ha of leasable industrial land, of which, only roughly 1,050 ha is available. The supply of leasable industrial land is being taken up at a high pace due to a lack of new supply in Ho Chi Minh City.
The current tenant mix of most industrial parks at present are mostly those who have set up their operation in the existing parks from many years ago. Thus, they benefited from much lower rent rates and also smaller increases in rates. However, due to the limited supply of industrial land in the city which as driven costs upward at a high rate, companies are shifting their focus to surrounding areas to find better priced alternatives.
Moving forward, the industrial supply in Ho Chi Minh City will increase by 613 ha upon the completion of phase two of Saigon High-tech Park. Announcements have also been made regarding the development of two additional expansions, namely phase three of Hiep Phuoc Industrial Park, and the expansion of Tay Bac Cu Chi Industrial Park. However, these parks are still awaiting confirmation of their completion dates.
Hanoi’s industrial parks will double in quantity
In the second quarter, Hanoi saw a staggering increase of 18.8% y-o-y in average rent, staying at USD121.5/sqm/term, due to limited new supply and sustainable demand. The crown of the highest rate belongs to Me Linh area, worth USD160/sqm/term, which is closely followed up by USD155/sqm/term in Bac Tu Liem. Meanwhile, Chuong My was the only area possessed the average asking rate under USD100/sqm/term. The average occupancy rate in Hanoi was successful to amaze the market with 95.1%, grew up to 12.5 ppts on the previous corresponding period. Bac Tu Liem and Long Bien are still proving as the most attractive industrial points with 100% occupancy rate. Whilst the newbies as Phu Xuyen and Thach That owned the lowest rates, at 25% and 37.2% respectively.
There are no new supply invading to Hanoi market and kept the stability. The sum of 10 operating IPs were covering more than 2,200 hectares and still waiting for expansion projects to stretch up to 3,500 hectares in the long term. The big three supplier of Hanoi are Chuong My, Thach That, Dong Anh, accounting for 68% of the market. In the future, there are eleven new Ips which will supply 2,856 hectares to Hanoi market and 5 of them are expected to start working in Q4/2019 . Currently, Ha Noi is having 70 Industrial clusters with 1,337 hectares supplying to 3,100 factories. By the end of 2019 and early 2020, there will have 9 more industrial clusters go to operation.
The electronics sector demonstrated a slight recovery, while manufacturing remained the gradual growth which is adequate to be a back-up for others. More than a half of the IPs in Hanoi left the vacancy rate at 0%, attesting that the demand here is at considerably high rate. Hanoi has been announced as the area received most registered FDI, worth USD4.87 billion, accounting for 26.4% the whole country. These numbers can be considered as the main factors influencing the upward trend of demand somehow.
Base on the approved IPs projects list, Hanoi is bound to enlarge its industrial land twice than the total of existing IPs in the next two years, escalating the total IPs up to 19 units. Yet, by the end of this year, it will be assumed that there is no new supply due to the restriction of the encouraging investment activities. Also, due to the trade war between the US and China, many companies such as Goertek or Warren Buffett confirmed that they would transfer their factories from China to Vietnam. Therefore, it will lead to the higher supply in Ips and also become an opportunity for Industrial park in Ha Noi as well as all over Vietnam to develop more.