Auto industry expansion fuels Vietnam’s industrial real estate sector

Global property management company, CBRE Vietnam has just released a new report that evaluates the impact of growth of the Vietnamese automobile industry on the industrial real estate market.

According to the report, over the past three years, auto producers from Asia, Europe, and the U.S. have been increasingly renting out industrial space and manufacturing facilities in Vietnam, giving real estate developers a significant boost.

Some of the companies and statistics noted in the report:

• Bentley from the United Kingdom has rented 5,000 square meters for a showroom and service center

• Camoplast Solideal from Luxembourg has rented 70,000 square meters of land to open a tire factory

• Mercedes from Germany has rented 5,500 square meters of land to open a distribution center

• Mogul Federal from the U.S. 5,000 square meters to make seats

• Schaeffler from Germany has leased 55,000 square meters to develop production facilities.

• Yazaki of Japan has rented 39,000 square meters for electric car cable production 

The CBRE report says that although Vietnam’s car manufacturing sector may be behind some other ASEAN countries, the consolidation of cleared land allocated for automobile production is increasing.

For both foreign and domestic producers, manufacturing facilities are mainly clustered in the north. Auto producers tend to choose this area to rent industrial land and due to the increased demand for industrial land, rental prices have increased.

At an industrial park in southern province of Dong Nai, the price to rent industrial land for long-term leases of up to 50 years has increased almost 50% from a year earlier and prices reached $90 per square meter last month, up from $60 to $70 per square meter last year.

Another report, this one by Jones Lang LaSalle (JLL) Vietnam shows that the average rent of industrial land in northern Vietnam hit $82 per square meter per lease term in the third quarter, an increase of nearly 9% compared to the first quarter of the year. Driven by limited supply, Hanoi’s average rents increased significantly to $137 per square meter per lease term, the highest in the north, 

Business experts believe that the auto industry has said a potential for dynamic growth in the years to come. The Ministry of Industry and Trade notes that there are only 358 businesses in the auto industry in Vietnam compared to 2,500 in Thailand and that at least 500 new companies are expected to enter the market by 2025.