JLL: Northern Regional Industrial Overview 3Q 2018
By JLL
Supply continued to enter the market: At end-3Q18, the total leasable industrial land area in the Northern Key Economic Zone ("NKEZ") was 12.260 ha, an increase of nearly 8% in total leasable stock compared to 1Q18. Hai Phong and Bac Ninh remained in their leading positions for industrial supply by contributing 53% of total stock. In line with the strong FDI pledged into Vietnam recently, these provinces continued to improve their investment environments with the expanding considerably in total supply in favourable locations having a well-established seaports system.
Healthy demand backed by strong manufacturing growth: The 3Q18 occupancy rate, augmented mostly in Hai Phong, Bac Ninh and Hai Duong Provinces, averaged 85%, an increase of 400 bps from 1Q18. Having significant advantages such as accessibility to major markets, synchronised infrastructure and better support from the government, Bac Ninh and Hai Phong remained the most desired destinations for industrial investment. The strong performance of ready-built factories was a result of the limited stock.
Land rent experienced healthy momentum: The average land rent in 3Q18 hit USD 82 per sqm per lease term, an increase of nearly 9% compared to 1Q18. Hanoi's average rent increased significantly to USD 137 per sqm per lease term, the highest amongst the NKEZ, driven by limited supply. Monthly rents for factory space ranged from USD 3 to USD 5.7 per sqm per month for a minimum lease term of 3-5 years.
Outlook
New supply proposed: Approximately 19.322 ha of industrial land is expected to enter the Northern market through 2020, mainly from Hai Phong, Hai Duong and Vinh Phuc.
Demand will continuously improve: Industrial properties will remain desirable due to strong FDI coming mostly from Japan, South Korea and Taiwan. Demand from China is expected to increase considerably. The factories shift out of China has been bolstered by the US-China trade war with an increasing number of manufactures seeking alternative locations for manufacturing from China.
[1] Excluding Hoa Lac High-tech Park owing to its special characteristic.
[2] Infrastructure maintenance, service fees and VAT are not included in the average rent.
About JLL
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 91,000 as of March 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.
