Demand and price of real estate logistics to increase

Forecasted new supply and vacancy rates in real estate logistics

According to the General Statistics Office of Vietnam, in January 2018, manufacturing production increased by 23.8 per cent year-on-year. The most notable improvements were recorded in tobacco (21 per cent), textiles (23 per cent), apparel (25 per cent), and especially in the manufacturing of computers, electronics, and optical products (38 per cent).

Forecast for 2018-2020

There have been several large-scale developments in these fields in recent years from global brand names such as Samsung, Foxconn, and LG.

In 2017, Vinfast, a local automobile manufacturer, is planning to open a car production line in Haiphong city and to launch their first model in 2020. This key project will attract vendors and suppliers to Haiphong city which will increase the demand for warehouse space.

Consumer spending is growing and is forecast to continue to increase over the next few years, especially in e-commerce. Several large internet retailers from China have entered the Vietnamese market, including Alibaba, JD.com, and Tencent. The expansion of modern retail outlets from giant international corporations such as Lotte and AEON, as well as the rise in the number of convenience stores are key drivers for warehouse demand.

According to CBRE enquiries, 3PLs (third-party logistics), retail, and manufacturing are drivers of the warehouse market. The preferred locations are Ho Chi Minh City, Binh Duong, Hanoi, Bac Ninh, and Dong Nai.

CBRE forecasts that the 4.0 Industrial Revolution also affects the warehouse market. More quality supply will come to the market in the next three years in the northern and the southern areas. In the regional market, automated storage and logistics robots are recommended in prime logistics space with flat layout, stable power supply, and excellent internet connectivity to increase competitiveness.

Forecasted rental price of real estate logistics

Furthermore, rents are also forecasted to increase in the next few years in both the northern and the southern areas. The northern region is centralised around the capital of Hanoi and the coastal provinces, including Haiphong. These are the most populated areas of the region, providing potential consumers and labour. Moreover, access to seaports in the coastal provinces is crucial for industrial development. The northern region is welcoming more interested foreign players in industrial park development.

In the northern area, with the limited level of new supply, rents are expected to increase by 2 per cent in 2018 and 1.5 per cent in 2019 and 2020, while the vacancy rate is expected to decrease from 22 per cent in 2018 and 19 per cent in 2020.

The southern region is located in the area surrounding Ho Chi Minh City, and has large ports, both sea and islands, as well as international airports and a system of well-developed highways connecting the provinces.

Due to its strategic locations closer to regional logistics hubs, such as Hong Kong, the southern region has long been the leading cluster in the Vietnamese industrial sector. In the southern area, rental rate will increase by 4 per cent in 2018 and 3.5 per cent in 2019 and 2020.

The southern area is expected to achieve higher rental growth thanks to strong demand from retailers, 3PLs, and manufacturers, as well as suppliers who come to the market from Gemadept, Saigon Newport, and Saigon Depot. However, the southern area is also expected to have a higher vacancy rate of 20 per cent in 2018 and 2020.