Uncovering Top Provinces in Northern Vietnam 2019
JLL’s most recent report on the potential of the Northern provinces in Vietnam highlights the characteristics that promise to be a platform for growth for the areas surrounding Vietnam’s capital city – Hanoi
VIETNAM, 10 October 2019 – Growth of Vietnam’s economy stayed strong despite global trade tensions, with a GDP increase of 6.98% in 2Q19. The United States and EU are the two largest export markets of Vietnam, while China and South Korea remained the two main import markets of the country.
The total foreign direct investment pledged to Vietnam was nearly USD26.16 billion in the first 9 months of 2019, equivalent to 77.7% of the same period in 2018. In the Northern Key Economic Zone (“NKEZ”), a large portion of rising demands are coming from manufacturers moving out of China due to the lingering trade war and investors who are looking to diversify their manufacturing portfolios. Possessing strategic location and a synchronised infrastructure system, NKEZ stands out to have suitable features for these enterprises to set their new operation.
Ranked 3rd among the top 10 most dynamic cities in JLL’s City Momentum Index 2018, Hanoi is swiftly evolving with major infrastructure updates, including a modern metro line on the way. Stephen Wyatt, Country Head of JLL comments “Hanoi is only behind HCMC in terms of corporate presence, the city has great potential to become the biggest investment hub in Vietnam. Congestion, pollution and transparency are among the top concerns from investors right now.”
The capital city possesses a strong demographic background with a young and tech-savvy population. E-commerce is among the most major threats to traditional retail malls, thus, retail spaces that are willing to work on brand image and revise leasing strategies achieved strong performance with high occupancy rate, while other malls were struggling to retain customer. Urbanisation and the development of surrounding industrial areas have driven a large population of people from nearby provinces to move their lives to Hanoi. Land supply running scarce coupling with delayed approval procedure have led investors to look beyond the city to find opportunities.
With an increasing proportion of FDI pouring into the north over the past decade, Hai Phong, Bac Ninh, Hung Yen and Quang Ninh are also fast becoming focal points for investment apart from Hanoi. Up to 3Q19, the total leasable industrial land area stood 9,371 ha. Bac Ninh and Hai Phong – the two leading industrial markets still have sufficient vacant land areas to capitalise the rising demand. Further, new supply from subsequent phase of existing industrial parks and newly developed ones in strategic locations have also offered more options, making these two provinces remain the most desirable areas in the North Vietnam.
The average industrial land price in 3Q19 hit USD 95/sqm/lease term, an increase of 6.7% y-o-y. Aside from Hanoi as the economic centre with the highest price, Bac Ninh and Hai Phong still post leading price thanks to their strong industrial foundation with well-known tenants, strategic location and established synchronous infrastructure system. Hai Duong and Hung Yen still kept their price at reasonable level. Average monthly rents for factory ranged from USD 4.0-USD 5.0/sqm/month. This rent level remained flat compared to the 1Q19 update.
The strong development in the manufacturing sector across the provinces has also brought with it the great potential for the establishment of other real estate sectors. This has been proven by strong investment pouring into the real estate market in the northern provinces as witnessed recently. The BCI Asia statistic shows that, after Hanoi, Hai Phong, Bac Ninh, Quang Ninh and Hung Yen are the top provinces in terms of the number of real estate developments. Apart from Quang Ninh, well-known for its Ha Long Bay and Van Don Special economic zone, the other three provinces have consistently led the north area regarding industrial developments.
Bac Ninh, Hai Phong markets are strongly driven by residential projects being developed to capitalise the growing housing demand from an increasing number of migrants and expats working in the provinces. Unlike Bac Ninh and Hai Phong where most developments concentrate in the city centre, most projects in Hung Yen cluster alongside its boundary with Hanoi, to benefit from the existing demand in this big city. Being home to Ha Long Bay, Quang Ninh has been hot on the radar of many well-known developers, focusing on vacation and tourism-related properties.
It has been reported that 615 ha was planned to be launched during the next 12-month period. Steady price growth for industrial land in the North of Vietnam is expected through end-2019 due to strong investor appetite. New investors – largely from Asian countries such as Japan, South Korea or China will remain keen on Vietnam’s industrial property. Since the wave of manufacturers shifting out of China still post no sign of cooling down, the investment will continue to pour into Vietnam, especially to the five key industrial cities of the North.
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