The demand for industrial real estate has begun to pick up steam in recent months as foreign manufacturers are expanding their presence in Viet Nam.

Foreign investors are hunting out industrial land lots to expand their operations in the country. Most of them operate in the electronics, semiconductors, textiles, and solar energy sectors.

Remarkably, Quanta Computer reached a deal with Nam Dinh Province in April to build a factory of US$120 million in My Thuan Industrial Park. Boltun Corporation and QST International Corporation followed suit with an investment of $165 million in Bac Tien Phong Industrial Park.

The quest for land lots was more arduous in the South as most of the lots in industrial parks had been occupied. Notably, the industrial parks in Binh Duong and Dong Nai Provinces had reached 95 per cent in occupancy rates.

The rising demand for industrial real estate has given a big boost to the segment of ready-built factories. Many lessors in the North have taken one step ahead by building more ready-built factories to cater to the growing need for facilities.

Cold storage warehouses are another category of facilities coming back in favour recently. However, the supply of cold storage warehouses remains tight as their construction requires so high an initial outlay that few lessors can afford.

Thomas Rooney, Senior Manager of Industrial Services, Savills Ha Noi, said Viet Nam had spent around 5.8 per cent of its GDP on facilities. The effort significantly improved the country's trans-provincial ties.

Part of the money went to 12 projects of the North-South Expressway, whose construction began in January this year. The projects would go through 15 provinces and act as a catalyst for local economic growth.

The senior manager also said labour costs in the country were increasing but very slightly. Although the costs remained modest in comparison with those in other regional countries, the shortage of well-trained workers discouraged many investors.

He urged the Government to take active measures to expand its skilled labour pool, thereby staying on par with other regional countries in attracting investors.

He also said the Socio-Economic Development Strategy for 2021-2030 would serve the country well in improving access to education and training, but it takes time for the strategy to take effect. A better workforce can not be achieved overnight.

Trang Bui, Country Head of Cushman & Wakefield Viet Nam, was concerned that the global economic instability and falling consumption would gradually dent the demand for industrial real estate, weighing on facilities for lease.

She forecast that the industrial real estate market would lose steam for the rest of 2023 as a result of the weakening demand. Lessees would become more cautious with money, leading to fierce competition in price among lessors.

She reckoned that the rent of ready-built factories would either level off or plunge owing to the surge in supply and drop in demand. However, the same doesn't go for land lots, whose rent would remain high regardless. — VNS