4Q19: Strong industrial demand did not translate to high net absorption
Despite ongoing strong demand for Southern industrial space in 4Q19, the market did not quite achieve a high net absorption rate.
Vietnam, 15 January 2020 - This was due to the prevailing high price and the lack of land bank readily available for occupation in some markets. Average occupancy rate therefore inched up modestly by 100 bsp from 2Q19 to reach 82% in 4Q19 across the top five industrial markets in SKEZ. Despite the numerous inquiries for land acquisition, however, many of those were unable to close successfully during the quarter.
No new IP was launched into the market in the review quarter. Besides, the market is undergoing a lack of readily available land for occupation, a result of difficulties in compensation and site clearance as recorded mostly in IPs in Dong Nai and HCMC.
Given an increasing number of inquiries received, landlords have become more confident to raise their land prices. The average land price in 4Q19 achieved USD 101 per sqm per lease term, up 12.2% y-o-y. However, logistics/infrastructure development cannot accommodate with such increase in land price as development process for significant changes still take place slowly, potential investors therefore starting to seek for other alternatives.
RBF - the favourite preference of SMEs - recorded an average rent ranging from USD 3.5 - 5.0 per sqm per month. While the rental rate increased slightly in Binh Duong, HCMC, Long An, it remained stable in other provinces as compared to the previous updated time.
The uncompleted land bank in existing IPs is expected to launch within 2Q&3Q20. Besides, roughly 1,890 ha of new IPs/new extensions is estimated to launch within 2020 in Southern area, mostly concentrated in Binh Duong as this province is currently running out of supply.
Manufacturing relocation trend will continue to benefit Vietnam's industrial market, although the US-China’ negotiation reached the very first stage, however, it is only considered as a “ceasefire”. Yet, in order to remain attractive to investors, IPs developers should consider their pricing strategies, taking into account logistics/infrastructure development, especially when the government is set to raise the new land price base early next year.
Figure 14: Total Stock and Occupancy Rate
Figure 15: Average Land and Factory Rents
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