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Vietnam Industrial Market Stays Strong

Xuan Pham • 08/01/2022

In 2021, the emergence of the new Covid variant has slowed down the global economic recovery. The pandemic also caused disrupt in global value chain, significantly increasing price of production materials, which is a significant challenge for production and business activities. Although facing many difficulties, Vietnam’s economy and industrial activities still made many achievements in the year 2021. Import and export activities continue to be the bright spot of the economy, with total value reaching US$668.5 billion, increasing 22.6% y-o-y thanks to previously passed FTAs. 

The total FDI capital in 2021 reached US$31.15 billion, a growth of 9.2% y-o-y. Among 71 countries and territories with newly licensed investment projects in Vietnam in 2021, Singapore is the largest investor with US$6.11 billion, accounting for 40% of the total registered capital, followed by Japan with US$2.79 billion, accounting for 18.3%. 

Notable FDI Projects in 2021:

Project Name   Nationalities   Total Registered FDI (US$) Location Province
3/2 Pharmaceutical Singapore 3.1 bilion Dong Nam A IP Long An
LG Display Hai Phong Korea 2.1 billion Trang Due IP Hai Phong
Polytex Far Eastern Vietnam Co., Ltd. Factory Project Taiwan 1.37 billion Bau Bang IP Binh Duong
O Mon II Thermal Power Plant Japan 1.31 billion O Mon District Can Tho
LEGO Group Denmark 1.0 billion VSIP III IP Binh Duong
Kraft Vina paper factory Japan 611.4 million Binh Xuyen IP Vinh Phuc

Source: FIA Vietnam, Cushman & Wakefield

The FDI flow came from both newly registered sources and expanding sources. This demonstrated the investors’ firm commitment and positive belief in Vietnam industrial market. Notably, the FDI flow now not only focused on the key Northern and Southern key economic zones, but also spread out further into less developed but high potential areas such as Quang Tri, Nghe An and Ha Tinh.

*All prices are exclusive of VAT, US$/VND = 23,163; US$/€ = 0.884 as at 16 December 2021

Submarket Inventory(ha) Vacancy Rate YTD Overall Net absorption (ha) Planned & Under construction (ha) Overall Avg Asking Rent *
VND/sqm/term US$/sqm/term EUR/sqm/term
West 834 15.6% 0 1,441 4,805,000 207.5 183.4
North 778 2.3% 24.9 73 3,303,000 142.6 126.0
South 701 25.8% 5.7 500 5,071,000 218.9 193.5
East 182 0.0% 0 0 3,384,000 146.1 129.2
HCMC total 2,495 13.2% 30.6 2,014 4,308,000 186.0 164.4

Source: Cushman & Wakefield

Market Supply & Occupancy: Total industrial stock in Ho Chi Minh City remained stable at approximately 2,500 ha. Occupancy rate was unchanged q-o-q and increased slightly 1 pp y-o-y to reach 87%, mainly due to the improvement of leased spaces at industrial parks in the northern. With a stable growth rate, an export-oriented economy, an increase in free trade agreements (FTAs), a young workforce, preferential investment policies and strategic geographical location, Vietnam continues to be an attractive destination for industrial real estate investors. Additionally, in the current context, Vietnam has implemented decisively a crucial policy “Living with Covid-19”, instead of “Zero Covid-19” that makes industrial market more positive.

HCMC significant projects planned & under construction Q4 2021

Property Submarket Size (ha) Completion date
Pham Van Hai Binh Chanh 768 2023
Hiep Phuoc – Phase 3 Nha Be 500 2023
Le Minh Xuan 3 – Phase 2 Binh Chanh 338 2023
Vinh Loc 3 Binh Chanh 200 2023

Source: Cushman & Wakefield

Rental Level Continued Trending Upwards: Average asking rent in HCMC achieve VND4,308,000/sqm/term, equivalent to US$186.0/sqm/term, rose by 1% q-o-q and 3% y-o-y, mainly due to limited available supply and rising demand. The overall rental level remained the highest nationwide, 31% higher than Hanoi’s, 35% higher than Long An’s, 72% higher than Binh Duong’s, 79% higher than Dong Nai’s and nearly double the rate at Ba Ria - Vung Tau.

*All prices are exclusive of VAT, US$/VND = 23,163; US$/€ = 0.884 as at 16 December 2021

Submarket Inventory(ha) Vacancy Rate YTD Overall Net absorption (ha) Planned & Under construction (ha) Overall Avg Asking Rent *
VND/sqm/term US$/sqm/term EUR/sqm/term
Thach That – Quoc Oai 705 26.4% 20 500 2,620,000 113.1 100.0
Me Linh 344 0.0% 0 266 4,169,000 180.0 159.1
Dong Anh 274 0.0% 0 300 2,780,000 120.0 106.1
Soc Son 182 3.8% 0 540 3,690,000 159.3 140.8
Chuong My 170 0.0% 0 225 4,401,000 190.0 168.0
Gia Lam 97 0.0% 0 0 3,938,000 170.0 150.3
Tu Liem 30 0.0% 0 200 4,169,000 180.0 159.1
HANOI TOTALS 1,802 10.8% 19.6 2,031 3,295,000 142.3  125.8

Source: Cushman & Wakefield

Market Supply & Occupancy: Total industrial stock in Hanoi remained at over 1,800 ha, unchanged q-o-q and y-o-y. Occupancy held steady q-o-q but increased 1 pp y-o-y to 89%. Most existing projects were either fully occupied or had limited space for lease. With favorable government incentives, competitive labor costs, a stable political environment, positive economic outlook and free trade agreements, Vietnam has become favored by foreign investors moving out of China.

Hanoi Significant Projects Planned & Under Construction Q4 2021

Property Submarket Size (ha) Completion date
HANSSIP Phase 2 Phu Xuyen 768 2023
Phu Nghia Phase 2 Chuong My 500 2023

Source: Cushman & Wakefield

Rent Performance: Hanoi average asking rent achieve VND3,295,000/sqm/term, equivalent to US$142.3/sqm/term, remained stable q-o-q but increased by 1% y-o-y due to rising rents at existing industrial parks with limited available land for lease. The average rent for industrial land in Hanoi remained the highest among the Northern provinces, at 71% higher than Hung Yen, 48% and 50% higher than Hai Phong and Bac Ninh respectively.

Over the longer term, many companies will seek to redesign their supply chains. Some manufacturers have already begun expanding their operations in new markets to help diversify production. More advanced markets will likely benefit from reshoring of key, ‘mission critical’, elements of the supply chain. On a broader front, the growth in intraregional trade in Asia, due to consumers across the region consuming more of the goods manufactured in the region, will drive new investment opportunities in manufacturing and logistics infrastructure. The period ahead in 2022-2023 will be a great opportunity for Vietnam in industrial segment.

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