Hanoi (VNS/VNA) - The supply of industrial property in the south isexpected to rise further in the next five years to capitalise on the increasingdemand in the region, and further strengthen its leading position in terms ofsupply, according to JLL Vietnam.

The provincial governments have shown further plans to establish new IPs ofroughly 23,400 ha in the future, which are all in notable markets surrounding HoChi Minh City. The ready-built factory market was also buoyant, with theexpected new launch of roughly 897,000 sq.m of ready-built factories by the endof 2021.

Nguyen Hong Van, JLL Vietnam’s Director of Markets, said since technologyconglomerates continue to eye Vietnam for production relocation, the demand forindustrial land and ready-built factory remains vibrant.

To lure foreign investments, localities in the Northern area have shown strongcommitment to promote IPs, with roughly 10,500 ha of additional supply in thefuture, she said.

In addition to existing markets, second-tier provinces like Hung Yen, Hai Duongor further north of Hanoi like Bac Giang and Vinh Phuc are emerging aspotential destinations for foreign investors, fostering the rents in thoseareas to speed up at an expected year-on-year growth of about 8-10 percent.

The ready-built factory market remains upbeat, with the expected new launch ofroughly 332,000 sq.m of ready-built factories by the end of 2021, predominantlyin Hai Phong and Bac Ninh.

According to JLL Vietnam’s quarterly report on Vietnam’s property market in thefirst quarter of this year unveiled on April 15, Dong Nai and Binh Duong accountedfor the biggest supply of both industrial land and ready-built factory sectorson the property market in the first quarter of this year.

The other localities still have a long journey to catch up to Binh Duong and DongNai’s industrial park supply as these two are the oldest-developed industrialmarkets. Whilst in terms of ready-built factory supply, Dong Nai overwhelmedother provinces due to its well-developed industrial base and sufficient landbank for ready-built factory developers to penetrate, Van said.

However, the report said that no new supply of either industrial parks orready-built factories was launched in the market in the quarter, she said.

Industrial properties in the Southern area remained significantly desirable formanufacturers to penetrate, although the pandemic still posed difficulties.Keeping the healthy demand momentum, both industrial land and ready-builtfactories recorded high occupancy rates at nearly 86 percent and 82 percent,increasing 0.60 percent and 0.76 percent compared to the fourth quarter of2020, respectively. Of which, industrial land recorded transactions which havebeen negotiated since last year, whilst ready-built factories witnessed newleasing expansions of existing tenants rather than newcomers.

Industrial land remained the hottest sector for either newcomers or to meet themanufacturing expansion needs of existing investors, backed by Vietnam’s strongmanufacturing fundamentals, Van said.

Therefore, most industrial park developers in Southern markets still maintainedstrong momentum to raise land prices reaching a new high at 111 USD per sq.mper lease term, up 8.1 percent year on year in the first quarter of this year.Whereas ready-built factory rents averaged 4.5 USD per sq.m per month acrossthe region, increasing 3.1 percent year on year, driven by the healthy demandsof small and medium-sized enterprises as they expanded operations.

According to JLL Vietnam, in the first quarter, no new supply in industrialland and ready-built factories were introduced in the Northern market. Thecumulative leasable land area in the market achieved roughly 9,500 ha, whilethe total supply of ready-built factories stood at approximately 1.8 millionsq.m.

Bac Ninh and Hai Phong dominated the total supply in both sectors thanks totheir strategic locations, strong footprints in the industrial market andimproving business environment.

The third wave of COVID-19 swept the northern area in late January has led tothe postponement of new investments in the region, especially the lockdown in HaiDuong freezing most of the transactions in industrial parks in the firstquarter.

Nevertheless, thanks to the strong influx of FDI in high-tech industriesstarting in the second half of 2020, the average occupancy rate of industrialparks recorded a healthy rate, reaching 75 percent, whereas the occupancy rateof ready-built factories stood at 98 percent in the quarter.

Given healthy demand, backed by Vietnam's strong industrial fundamentals andcombined with industrial park developers’ strong confidence in potentiallong-term investments, the land price continued its momentum to reach a newpeak of 107 USD per sq.m per lease term in the first quarter, up 8.1 percent yearon year.

Meanwhile, ready-built factory rents also showed an increasing trend, at 5.8 percentyear on year, of which Bac Ninh recorded the strongest growth rate of nearly 9 percentyear on year fuelled by the launch of high-quality ready-built factories./.