Industrial land leasing costs rise in southern Vietnam

By Minh Nga July 21, 2019 | 05:44 pm PT

The gate into Song Thuan Industrial Park in Vietnam's southern province of Binh Duong. Photo acquired by VnExpress.

Rents in industrial parks in Ho Chi Minh City and neighboring localities increased 15.8 percent against the same period last year.

The average land leasing costs in the second quarter of this year at industrial zones in HCMC and the provinces of Binh Duong, Dong Nai, Long An and Ba Ria-Vung Tau climbed to $95 per square meter, said real estate firm Jones Lang LaSalle Vietnam (JLL) in its report on Vietnam’s property market for Q2, 2019.

HCMC topped the market with average rent of $162 per square meter per lease term.

The average occupancy rate in industrial and processing zones in the south was 81 percent in Q2, JLL said, adding that the rate was driven by HCMC, Binh Duong and Dong Nai.

As the first established industrial areas in the country, Binh Duong and Dong Nai are still the most desired destinations for new manufacturers, thanks to the foundation they offer for manufacturing development, including synchronized infrastructure and well-established administrative procedures supporting companies’ operations.

The higher demand for industrial land in Vietnam can be attributed to escalating trade tensions between the U.S. and China, JLL said.

Real estate services firm CBRE in a report released on April 25 said that in 2018 it recorded "an increase in production facilities shifting from China to alternative locations in Southeast Asia, including Vietnam."

With the U.S. poised to slap 25 percent tariffs on another $300 billion-plus of Chinese goods, no exporter in China will be unscathed, Reuters said in June.

In recent years, some Chinese manufacturers had already started to relocate some of their capacity to countries like Vietnam and Cambodia, due to high operating costs at home as a result of rising wages and a labor crunch. The trade war is pushing more to follow suit, especially makers of low-tech and low-value goods.

As of Q2, the south of Vietnam had registered a total leasable land area of 25,060 hectares (62,000 acres), 2.5 times higher than that of the north, and additional 18,290 hectares of land is oriented for industrial development, mostly in Long An, Binh Duong and Dong Nai provinces, JLL reported.