APPD Market Report Article

Vietnam South

September 4, 2023

Trang Le, Head of Research, Vietnam


USD 4.66


Market demand driven by domestic demand

  • The Southern logistics market was mainly driven by domestic demand due to the prolonged stagnation of cross-border trade in 1H23. Retailers and 3PLs continued to exhibit growth and played a pivotal role in maintaining market dynamics. Low business efficiency has forced export manufacturers to rescale, affecting leasing performance of Ready-Built Warehouses (RBWs) located in manufacturing hubs.
  • Although the total net absorption remained positive at roughly 52,400 sqm, it was not indicative of strong market sentiment. This has been demonstrated by the high vacancy rates of new completions. Net absorption was underpinned by built-to-suit orders by large-scale enterprises.

Long An tops in terms of new supply

  • The market welcomed abundant new supply across the Southern region with over 243,000 sqm of space, mostly in Long An province. The total stock has therefore increased to 1.8 million sqm. Newly-launched projects accounted for 14% of total supply, marking the official entry into the South by JD Property and KCN Vietnam, as well as the continued expansion of BWID and SLP.
  • Given that there was less active leasing activity in new completions and a drop in absorption in existing projects, the vacancy rate in 2Q23 was relatively high at 37.3%. The logistics market showed signs of slowing down as tenants put expansion plans on hold in the face of global headwinds.

Average asking rent remains stable

  • The average asking rent was generally stable at USD 4.7 per sqm, per month, increasing slightly by 2.0% h-o-h and 7.4% y-o-y. This was regulated by rent escalations applied for the new year as well as the entry of new, high-quality projects into the market. Landlords continued to be flexible and facilitate negotiations to support tenants amidst a slowing market. 
  • Capital values continued to rise very slightly or remained stable, primarily driven by higher rents in the new supply. Yet this trend is expected to be temporarily disrupted by the current gloomy macroeconomic conditions. The overall market yield still maintains its compressive momentum, given strong long-term growth expectations.

Outlook: Tenants and developers maintain a wait-and-see attitude

  • In the remaining six months of 2023, the Southern area is expected to welcome over 440,000 sqm of Modern RBW from projects developed by SLP, LOGOS, Emergent Capital Partners and BWID. By the end of 2023, the market size should expand to 2.2 million sqm, 1.3 times higher compared to the current scale. 
  • In the short term, the logistics market dynamics should continue to be driven by domestic demand. Meanwhile, export activities are expected to recover in growth in 2H23 or early next year, but at a slow pace. In the face of global headwinds, developers and tenants have become more cautious in expanding their businesses as well as deploying new projects, maintaining a wait-and-see attitude.

Note: Vietnam South Logistics & Industrial refers to the Vietnam South prime logistics market.

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