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Wednesday, June 19, 2024

Positive signs arise in industrial real estate market

By Dung Nguyen

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The industrial real estate market in the northern region shows promising signs of growth in the initial months of 2024, with rising supply, stable rental prices, and a sustained influx of foreign investment in high-tech manufacturing.

Strong capital flows

The industrial real estate market remained a bright spot in the first months of this year, marked by a persistent influx of foreign investment capital into Vietnam’s manufacturing sector.

Data from the General Statistics Office showed that Vietnam attracted about US$4.63 billion in new foreign investments in the first quarter of 2024, a 7.1% increase versus the year-ago period. This also represents the highest first-quarter level since 2020. Notably, the number of newly registered projects surged by 23.4%, while registered capital climbed by 57.9% year-on-year.

Another positive sign in the first few months of the year is the resurgence of import-export activities. Export earnings soared by 17%, resulting in a trade surplus of US$8.08 billion. Moreover, exports of high-value items continued to exhibit robust growth, such as electronics, computers, and components with an upsurge of 30.3%; machinery, equipment, and spare parts with a rise of 10.2%; phones and components with an expansion of 9.7%; and textiles with 7.9% growth in export value.

Amidst the rising investment trend, Vietnam has remained a destination of choice for high-tech investment capital inflows. For instance, in March, Victory Giant Technology got approval to invest US$800 million in a facility in VSIP Bac Ninh 2, with a focus on research and development, and production of high-precision circuit boards.

According to CBRE’s report, the ongoing prevalence of large transactions across various sectors and countries last quarter, along with the decades-long trend of exporting high-value technology goods, is a promising sign for heightened investment in Vietnam’s emerging high-tech industries.

Increasing supply of housing and modern factories

The strong investment capital flows into the manufacturing sector and the robust growth of exports are anticipated to enhance macroeconomic conditions and drive the development of industrial parks.

For instance, Bac Ninh Province came second nationwide in attracting foreign investment in the first quarter, accounting for nearly 12.1% of the total. Currently, the province is home to 18 operational industrial parks, the highest number of industrial parks in the northern region. This province remains attractive to investors in the industrial real estate market.

KCN Vietnam, a professional industrial real estate developer in Vietnam, broke ground on a ready-built factory and warehouse project in Thuan Thanh III Industrial Park – Zone B, Bac Ninh Province in the middle of April this year.

Strategically located at the northeast gateway of the capital city with convenient access to major roads, KCN Vietnam’s first project in Bac Ninh covers an area of 14 hectares. It is planned to provide over 90,000 square meters of high-quality warehouse and factory space for lease to the market. Work on the project is expected to last until the first quarter of 2025. However, half of the ready-built warehouse space would be completed and ready to be handed over to investors by the fourth quarter of this year.

The leaders of the Industrial Zones Authority of Bac Ninh, KCN Vietnam, and construction contractors jointly organize the groundbreaking ceremony for the ready-built factory and warehouse project at Thuan Thanh III Industrial Park – Zone B

“We expect that this project will draw investors in high-value industries, such as high technology, clean technology, electronics, light industry, food processing, and supporting industries,” said a representative of KCN Vietnam.

In fact, Bac Ninh has stood out for its ability to attract FDI over the past several years, particularly from Northeast Asian countries like China, Japan, and South Korea. A key to this success has been its emphasis on developing high-quality industrial infrastructure, with modern ready-built warehouses and factories.

The northern region is gaining recognition for its ability to attract manufacturers, thanks to the steady growth in industrial estate supply.

According to VPBanks Securities’ report, northern Vietnam saw an increase of 1,000 hectares of industrial real estate supply, with contributions from five major projects in Hung Yen, Hai Phong, and Bac Ninh. The total market supply was estimated at 16,367 hectares, with 70.3% of the land area available for lease.

CBRE suggests that the industrial park market in the northern region has remained stable and exhibited good growth, with an increasing number of operational warehouse and factory projects in key areas. Rental prices for warehouses in the first quarter of 2024 inched up by 2.2%, while those for factories rose by 3.9% year-on-year.

Mr. Nguyen Duc Cao, deputy head of the Bac Ninh Industrial Zones Authority, said that the KCN Vietnam’s new project is a crucial catalyst for attracting FDI, thereby fostering socio-economic development in the province

This demonstrates the market’s appeal in the early months of 2024, propelled by the availability of high-quality industrial park spaces for customers in electronics manufacturing and electronic components. Consequently, this trend contributes to a steady rise in rental prices.

Unlike the market fluctuations in the southern region, the northern localities are expected to see a continued increase in supply, not only in traditional tier 1 areas but also expanding into tier 2 markets in 2024. Estimated new supply in tier 1 and tier 2 areas is projected to be 3,039 hectares and 2,268 hectares, respectively. Leading the tier 1 market is Haiphong with an estimated increase of around 945 hectares during the 2024-2026 period, followed by Bac Ninh with 874 hectares.

“With its favorable geographical location and conducive environment for manufacturing electronics and electronic components, the northern industrial park market remains a promising destination to capitalize on growth opportunities amidst shifting trends,” VPBank Securities’s report said.

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