Sufficient land bank in Northern for upcoming investments

The restricted travel during Covid-19 outbreak had made it difficult for traditional site inspections and direct meetings. However, the demand for industrial land kept momentum in 3Q20 as Vietnam was still a favourable destination for investors. To support the demand, more and more online platforms have been invested such as site virtual tours, online webinars, upgraded IPs' websites, etc. Therefore, tenants still had opportunities to evaluate and secure land from distances. Plus, there remained several transactions started before the outbreak and only signed this quarter, which all brought the average occupancy rate up by 160 bps compared to 1Q20, achieved 74% in 3Q20.

The main sources of demand for industrial land remained manufacturers who wished to diversify their manufacturing portfolios outside China – especially in high-tech industries. Meanwhile key tenants for RBF continued to be SMEs.

Sufficient land bank for upcoming investments

With large existing land bank, Hai Phong and Bac Ninh were leading industrial land supply in the North. Amid upcoming investment waves, Northern cities and provinces have also planned to open new IPs and expand existing ones, of that Hung Yen and Hai Duong are the most active localities in new IP developments. Overall, the supply for industrial land in the North is expected to rise further in the next five years to capitalise the increasing demand in the region.

Land price reaches new record high

Given Vietnam’s potential as one of the most sustainable manufacturing hubs, most IP developers in Northern markets maintained strong bargaining power regardless of Covid-19. This lifted land prices to a new peak of USD 102 per sqm per lease term in 3Q20, up 7.1% y-o-y. RBF rents also inched up slightly, ranging from USD 4.1-5.2 per sqm per month in 3Q20, an increase of 2.1% y-o-y.

Although Covid-19 may temporarily disrupt investments in Vietnam, there will remain great interests in the country, as it is considered as new regional industrial powerhouse. This will support both demand and supply for industrial properties in Vietnam and the North in future. Moreover, some innovations during the outbreak including virtual applications and online marketing platforms have shown effective and are expected to get more popular. Therefore, those developers who wish to push forward businesses amidst the rough time should consider seriously into such platforms.

^{Note:
[1] In this report, Northern industrial market refers to Hanoi, Hai Phong, Bac Ninh, Hung Yen and Hai Duong markets only.
[2] This is average primary land price and occupancy rate recorded in all operating IPs, including all fully occupied IPs (regardless the time of full occupation of that IPs) and IPs having available land for lease. Factory rent recorded in properties primarily developed by IP developers. Infrastructure maintenance, service fees and VAT are not included in the average land rent. Leasing term is the remaining years. 
[3] Hanoi total supply excluding Hoa Lac High-tech Park owing to its special characteristics.
Source: JLL Research}