Southern Industrial Land and Ready-built Factory 3Q21
Market stayed silent, impacted by the fourth outbreak
No new industrial park was launched in the review quarter. The Southern industrial land market remained resilient with a total leasable land area of 25,220 ha as of 3Q21 – the most stressful period for all economic sectors - as the fourth Covid-19 wave hit the region. A similar situation was observed in the RBF market, with only a modest supply launched since its construction started in 1Q21. Total supply for RBF achieved at 3.3 million sqm.
Modest occupancy rate in both property markets
The review quarter is observed to have the most severe impact as the outbreak occurred in the Southern region, where infections increased significantly. All activities were put on hold, causing constraints for investments and ongoing manufacturing. The market witnessed no notable land or RBF transactions. The occupancy rate of IPs and RBF is 85% and 87%, respectively. Only by reopening to the “new normal”, the market may revert to its full potential for investments.
Land prices grew at a slower pace, whilst RBF rents stabilised
As of 3Q21, IP developers in the South witnessed difficulties in the demand side as manufacturers and investors were unable to implement any further activities. The land price also set a new peak at USD 114 per sqm per lease term, but only at a slower pace than previous quarters, increasing only 0.75% q-o-q and 7.3% y-o-y. Whist RBF rents stabilised at USD 4.5 per sqm per month as a facilitating method for tenants, increasing only by 1.4% y-o-y.
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Outlook: Short-term volatility does not affect medium/long-term potential
The pandemic has caused severe negative constraints to manufacture and investments activities during the quarter. Besides the decrease in newly registered FDI projects into Vietnam, market has also seen some manufacturers to outsource most pre-orders to their factories outside the country to cope with the disrupted operations in Vietnam. The fourth wave of the pandemic has raised concerns in the foreign business community; however, this movement is seen as being temporary and no foreign entities have shifted factories out of Vietnam thus far. The country remains an attractive destination for FDI. Thanks to the advantages of human resources, various FTAs and the government commitment to infrastructure development, Vietnam will continue benefiting from the changing global supply chain.
It is crucial that the Southern economy reopens to the “new normal” to recover its potentials and further strengthen foreign investors’ confidence in the country. Also, the reopening procedures should accompany clear instructions for enterprises in the new situation for effective recovery after a struggling time.
Note:
- Southern area consists of HCMC, Binh Duong, Dong Nai, Ba Ria – Vung Tau and Long An markets.
- Land prices exclude Infrastructure maintenance fees, service fees and VAT. Lease term means the remaining land lease term of the project life time.
- Rents exclude VAT and service charges.
- Saigon High-tech Park and Quang Trung Software Park are not included in the surveyed basket owing to their special characteristics.
Source: JLL Research
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