Ready-built factories are popular with tenants

The increase in foreign investment continues to open up opportunities for the market of ready-built warehouses and factories.

Supply increases, occupancy rates increase

Mr. Dinh Hoai Nam, Director, Head of Business Development and Project Development Department of SLP Vietnam, commented that with the recovery of consumer demand after the shock of the Covid-19 pandemic, consumer confidence has been strengthened again. Along with the need to stock up on goods for the end of the year, the ready-built warehouse market has significantly improved in absorption and increased steadily over the months. The average rental price increase in the Southern region is more positive than in the Northern region.

In addition, the amount of foreign investment in Vietnam continues to increase sharply, along with the investment commitment of the “Queen Bees”, helping the occupancy rate of ready-built factories to remain at a good level. In particular, the North has recorded the entry of Chinese enterprises and the expansion of “Queen Bees” in the electronics industry such as Samsung, LG, Foxconn..., along with related supply chains, making the ready-built factory market more vibrant.

Data from Cushman & Wakefield shows that as the e-commerce industry grows and foreign investment increases, demand for warehouses and ready-built industrial space is rising sharply. The total net absorption of ready-built factory space in the third quarter of 2024 was recorded at more than 245,000 square meters, up 43% quarter-on-quarter and double that of the same period last year.

Similarly, CBRE Vietnam recorded that the average warehouse occupancy rate in the third quarter of 2024 increased by 4% compared to the second quarter of 2024, reaching 65%; the factory occupancy rate increased by 7% compared to the previous quarter, reaching 88%. In the first 9 months of 2024, the Southern Tier 1 market leased nearly 357,000 m2 of warehouses and 700,000 m2 of factories, nearly 3 times higher than the same period last year. The demand for ready-built warehouses in the South comes from manufacturers in the high-tech, electronic components, and logistics sectors, in addition to the expansion of companies in the e-commerce sector.

The good absorption rate of factories also makes the warehouse market record a fundamental conversion of functions. JLL Vietnam said that in the third quarter of 2024, the trend of converting asset functions continued to take place in the southern industrial real estate market. The northern area of Binh Duong province recorded more than 18,000 m2 in a ready-built warehouse project converted into ready-built factories. The conversion of the ready-built warehouse development plan is to cope with the reality of excess supply, while the gloomy demand has significantly reduced the supply of new ready-built warehouses.

Cushman & Wakefield forecasts that the ready-built factory market will welcome a future supply of about 1 million square meters in the period of 2024 - 2027. In the context of low demand for ready-built warehouses, the trend of converting from ready-built warehouses to ready-built factories may continue in the near future, causing the supply of ready-built factories entering the market to be higher than forecast.

Rent increases accordingly

Overall, increased rental demand in Q3/2024 will continue to drive rental prices up. Ms. Trang Bui, General Director of Cushman & Wakefield, said that the average rental price of ready-built factories was recorded at 4.8 USD/m2/month, up slightly by 0.3% quarter-on-quarter and 1.1% year-on-year.

The increase in rental prices is due to newly launched projects with higher rental prices than the market average. However, at the project level, most developers still keep rental prices stable to stay competitive.

Among the provinces in the Southern Key Economic Zone, Binh Duong leads in terms of net absorption of ready-built factory area in the third quarter of 2024 with 159,000 m2, accounting for 65% of the total area, followed by Dong Nai with 27%. Demand for ready-built factory rental comes from industries such as electrical equipment, furniture and paper products.

CBRE Vietnam shares the same view and forecasts that in the next 3 years, rental prices of ready-built warehouses/factories will increase slightly by 1 - 4%/year, in which the ready-built factory segment will have a higher price increase rate.

Positive demand from the electronics, semiconductor, automobile and spare parts industries will be an important driving force for the development of the Northern industrial real estate market in general and the ready-built factory segment in particular.

Regarding rental prices, according to Mr. Dinh Hoai Nam, rental prices are reflecting the supply-demand relationship of the market. The demand for warehouse and factory rentals mainly comes from foreign-invested enterprises, with high requirements on product quality and location, which has driven and promoted rental prices to increase.

Improvements in domestic consumption demand and increasing requirements for delivery times have also encouraged businesses to choose to rent warehouses near the center, with good quality, despite the higher prices. These factors are expected to continue to dominate and support the market's absorption rate in the future.

However, rental price is only a small factor in determining occupancy rate. SLP Vietnam representative acknowledged that location is the first factor customers consider when choosing to rent, such as warehouses need to be located in convenient traffic areas, near residential or production areas, easily connected to transit areas such as seaports and airports. The second factor is product quality.

This is not only demonstrated through the ability to operate continuously and without interruption, but also through utilities and features that help optimize operations and use resources effectively. For example, warehouses with 2 to 4 import and export items will help increase operating capacity, very suitable for logistics or e-commerce businesses.

In addition, tenants also pay attention to the “green warehouse” factor. They often consider environmental-friendly certificates and measures such as rooftop solar power systems, water reuse, etc., thereby making rental decisions in line with sustainable development trends.

Source: https://baodautu.vn/nha-xuong-xay-san-duoc-long-khach-thue-d230070.html