Warehouse demand soars, but supply modest

JLL said in a report that the net absorption rate of ready-built warehouses in the north rose 2.6-fold in the third quarter to 90,000 square meters.

Besides retailers and e-commerce businesses, manufacturers and distributors have also been renting them.

Higher demand was also seen in the south with the net absorption being 86,000 sq.m.

Cushman & Wakefield said ready-built factory and warehouse rents rose in the south in the third quarter as absorption rates increased 2.4- and 6.7-fold from the previous quarter. The highest demand was in Dong Nai Province.

Warehouse supply in Hanoi and HCMC has reached two million square meters and 5.1 million square meters.

Some industrial parks and warehouses in the two cities are nearly fully leased.

"Demand will rise increasingly in the near future, and supply will not meet the demand," Trang Bui, general director of Cushman & Wakefield Vietnam, said.

Thomas Rooney, senior manager of industrial services at Savills Hanoi, said the logistics market has yet to be fully tapped but supply of warehouses is running short.

The growing e-commerce market is a major reason for the surging demand for warehouses.

E-commerce revenues rose by an estimated 25% year-on-year in the first half of this year to US$10.3 billion, and are expected to be worth $20.5 billion for the year, according to the Department of E-commerce and Digital Economy.

According to Bui, with Vietnam becoming an investment destination for many manufacturing and logistics companies, demand for high-quality logistics real estate is booming.

She said Vietnam is competing with Dubai and Hong Kong, even Singapore and Shanghai, to become a global goods transit hub.

Cushman & Wakefield’s annual survey in 2022 found 40% of participants choosing Vietnam as the second emerging market to invest after India.

JLL forecast the north to add 700,000 sq.m of warehouse space next year to take total supply to 1.6 times the current availability.

The market is also expected to expand to neighboring provinces such as Vinh Phuc, Bac Giang and Quang Ninh.

In the south, availability is expected to rise to nearly 1.6 times through this year.