The attraction of industrial real estate in the North
In the first half of 2023, the northern provinces and cities attracted the largest foreign investment in the manufacturing sector with 3.4 billion USD, equivalent to 63% of newly registered FDI manufacturing projects with 238 new projects.
Of which, Bac Giang accounts for 20% of the total newly registered projects with 1.06 billion USD, including the investment in Singapore's Fulian Precision Technology factory, worth 621 million USD and the project of LONGi Green Energy Technoly Co. Ltd, worth 140 million USD. Bac Ninh ranks third nationwide in attracting FDI in manufacturing with 9% of the total registered capital worth 486 million USD.
In terms of investment sectors, in the first half of 2023, electrical equipment accounted for the largest amount of newly registered FDI capital in manufacturing with 21%, worth 1.14 billion USD. Next was the computer, electronics and electrical products industry with a total investment capital of 20% and rubber and plastic products accounting for 15%.
Illustration photo. (Source: DK)
By economic region, it can be seen that in the Northern Economic Region, the main sectors receiving new investment capital are computers, electronics and electrical products, accounting for 19% of the total investment capital of the whole region; followed by electrical equipment (15%); rubber and plastic products at only 5% and motor vehicles at 4%. Meanwhile, in the Southern Economic Region, the picture is somewhat opposite when rubber and plastic products have the largest amount of investment capital, accounting for 10% of the total investment capital of the whole region, metal manufacturing accounts for 4% and drinking water accounts for about 3%.
In addition, manufacturers and solar energy are also noted to be shifting north. Three of the top five manufacturing projects in the Northern Economic Zone in 2022 are in the solar-related sector. Of the 30 solar product manufacturers nationwide, 77% are located in the Northern Economic Zone and only 23% in the Southern Economic Zone.
Trina Solar is the largest investor with a $275 million project in Yen Binh Industrial Park, Thai Nguyen Province. Investors are mostly from China, Hong Kong and Singapore. In the first half of 2023, US solar module manufacturer Thornava Solar also started production at a modern factory with an annual capacity of 1 gigawatt in Que Vo Industrial Park, Bac Ninh Province.
In 2023, Vietnamese private corporation AD Green inaugurated a 3-gigawatt factory worth $45 million, producing solar panels for domestic and foreign markets. The facility covers an area of nearly 8 hectares in the An Ninh Industrial Cluster, Tien Hai District, Thai Binh Province.
It can be seen that the main tenant group in the Northern Region is tenants in high value-added sectors, including electronics and computers, automobiles, machinery and equipment and solar-related manufacturing with tenants being large-scale corporations such as Samsung, LG Electronics, Foxconn, Canon, Hyundai, Honda and Vinfast.
Meanwhile, the main tenants in the South are enterprises processing rubber and plastic products, food and beverage, construction materials and garment – industries that are assessed to have lower added value.
Mr. Thomas Rooney, Senior Manager, Industrial Advisory Services, Savills Hanoi commented: The Northern Economic Zone has a strategic location, with good access to domestic and international markets.
Over the past 5 years, the infrastructure in this area has improved significantly with a series of expressway projects connecting three major ports, including Hai Phong Port, Lach Huyen Deepwater Port, and Cai Lan Port. In addition, the Northern Economic Zone owns a large land fund, meeting the area demand of tenants operating in high value-added sectors, attracting many large investment projects in automobile assembly, electronic components, and solar energy products.
"It can be seen that the Northern Economic Zone is considered a great advantage for investors, not only taking advantage of one of Vietnam's important import-export routes through Hai Phong but also being able to conveniently move goods to serve neighboring markets," said Mr. Thomas Rooney.
High rents can reduce competitive advantage
According to Savills Vietnam, in the first half of 2023, the North recorded 68 industrial park projects with a total area of up to 12,000 hectares. The average occupancy rate reached 83%, up from 81% over the same period last year. The average land rental price reached 138 USD/m2/rental cycle, up from 102 USD/m2/rental cycle.
Land tax rates in industrial parks in the North are increasing, reducing the competitiveness of the Northern economic zone compared to the South. (Photo: DP)
Of which, Bac Ninh has the largest land rental price increase of 48% compared to the same period in 2022, reaching 156 USD/m2/rental cycle thanks to the renewed interest of electronics companies and suppliers with the need to diversify supply chains outside of China.
Hung Yen increased by 45% over the same period, reaching 132 USD/m2/rental cycle. Similarly, key provinces also recorded increases with Hai Duong (up 33%, reaching 101 USD/m2/rental cycle), Hai Phong (up 28%, reaching 129 USD/m2/rental cycle).
Savills' report also shows that the supply of ready-built factories in the Northern economic region reached 3.5 million m2 of net lettable area (NLA) with about 618,000 m2 of NLA remaining. The average rental price is 4.8 USD/m2/month (excluding VAT) in the first half of 2023. Meanwhile, the occupancy rate of ready-built factories and warehouses in the Northern region recorded a decrease to 83% due to new supply launched in Hai Phong and Bac Ninh.
According to Mr. John Campbell, Deputy Director, Head of Industrial Services, Savills Vietnam: “Current land rental prices in the Northern Economic Zone have exceeded double digits, reducing the competitiveness of the Northern Economic Zone compared to the Southern Economic Zone. Higher land prices may hinder the entry of new electronics, automobile and solar energy manufacturing enterprises. These are investors who want to own large land plots but at reasonable prices”.
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