Warehouses And Factories Will Be ‘Thirsty’ For Supply

After a gloomy first half of the year, demand for the factory and logistics market is growing again. JLL’s report shows that in the third quarter, the demand for renting ready-built warehouses in the North gradually stabilized with the net absorption rate 2.6 times higher than the previous quarter, reaching nearly 90,000 m2.

In addition to retailers and e-commerce, the motivation for renting warehouses is more diverse with the participation of manufacturers and distributors.

This trend also occurs in the South. JLL stated that the southern logistics market entered the year-end period with positive signs, with a net absorption rate of about 86,000 m2.

The high occupancy rate largely lies in projects launched from the end of last year to the beginning of this year.

Cushman & Wakefield’s report also shows that in the third quarter, ready-built factory and warehouse rental activities in the South became more vibrant with absorption levels 2.4 times and 6.7 times higher, respectively with the previous quarter.

Among them, Dong Nai leads in rental demand. Cushman & Wakefield acknowledges that in the last months of the year, when demand from the market is forecast to increase fourfold, the “thirst” for factory and warehouse supply becomes even more severe.

Total warehouse supply in Hanoi and Ho Chi Minh City currently reaches 2 million m2 and 5.1 million m2, respectively. Meanwhile, industrial parks and logistics warehouses in these two large cities have all been filled, in some places reaching nearly 100%. The demand will become increasingly greater in the near future.

“According to calculations, supply cannot meet demand, pushing up the competitive pressure of retail and transportation businesses,” said Ms. Trang Bui, General Director of Cushman & Wakefield.

Mr. Thomas Rooney, Senior Manager, Real Estate Consulting Services, Savills Hanoi also said that the current logistics market has not yet fully exploited its potential.

Supply is lacking, requiring investors to flexibly introduce new models and optimize available warehouse space.

Reasons for increased demand for factories and warehouses

The reason for the increased demand for factories and warehouses is the increasingly strong e-commerce market.

In the first half of 2023, e-commerce revenue is estimated to reach 10.3 billion USD, up about 25% over the same period, accounting for 7.7% of national consumer goods and services revenue.

Revenue for this year is estimated to reach 20.5 billion USD, according to a report by the Department of E-commerce and Digital Economy. Mr. Thomas analyzed that the e-commerce industry needs large warehouse space to store many items and install systems to support picking and packaging activities.

International manufacturers expect to have warehouse space to store goods after production. Therefore, investing in infrastructure and logistics systems will strengthen the supply chain for manufacturing businesses.

Ms. Trang Bui said, with the development of the e-commerce industry, Vietnam is becoming a destination for many businesses in the manufacturing and logistics sectors, leading to demand for high-quality logistics real estate.

She said, Vietnam has the ability to compete with Dubai and Hong Kong, even Singapore or Shanghai to become a global logistics center.

The results of Cushman & Wakefield’s annual survey with global customers in 2022 show that 40% of participants choose Vietnam as the first emerging market to invest, after India.

In particular, the recent visit of US President Joe Biden brought a comprehensive cooperation agreement, promoting the high-tech and semiconductor manufacturing market between the two countries.

Regarding future supply, JLL forecasts that the North will have an additional 700,000 m2 in 2024, bringing the total supply to increase 1.6 times compared to the present.

The market is expected to expand to neighboring provinces such as Vinh Phuc, Bac Giang, Quang Ninh with the advantage of competitive land prices and available land fund. In the South, the market size by the end of this year is expected to increase nearly 1.6 times compared to the present.