Positive net absorption, driven by demand for built-to-suit

• Positive net absorption was recorded, primarily underpinned by domestic demand in the last quarter of 2023. In addition, built-to-suit (BTS) orders are also a driving force to help balance supply and demand in the Southern logistics market.
• Generally, market dynamics have not fully recovered in the face of global headwinds, and tenants maintain their cautious attitudes about new warehouse leasing decisions. Tenant preference is mainly oriented towards new facilities in good locations, while projects in relatively remote places or long-standing warehouses with old technical systems face longer void times to fill up the space.

The market welcomes new supply in HCMC and Long An

• The Southern Modern RBW market continued to welcome new supply during 2H23, developed by SLP, LOGOS, Emergent Capital Partners and BWID. During 2H23, more than 195,000 sqm of new space was added in HCMC and Long An province, bringing the market stock up to 1.9 million sqm, an increase of 26.3% y-o-y.
• BWID’s continuous expansion has reinforced its leading position with a 30.3% market share in the Southern region at the end of 2023, followed by Mapletree and SLP, which contributed approximately 400,000 sqm and 145,000 sqm of Modern RBW, respectively.

Average asking rent maintains its uptrend, yet at a moderate level

• The average asking rent posted a slight increase to reach USD 4.8 per sqm per month, up 1.7% h-o-h and 3.9% y-o-y, mainly driven by the entry of new high-quality projects with high rents. Meanwhile, some projects with low leasing performance had to reduce asking rents to attract potential tenants. Demand-stimulating strategies, mostly long rent-free periods, have been adopted to entice tenants.
• Capital values continued an upward trend, primarily backed by persistent investment interest. Yet the trend has been temporarily disrupted by the current gloomy macroeconomic conditions. Yield compression continued, though at a slower pace than in 1H23.

Outlook: Market size is expected to expand, shifting to favour tenants

• Domestic demand is projected to be the main driving force for the logistics market in 2024, while cross-border trade activities are expected to recover at a slow pace. Developers show signs of being cautious with the implementation of new projects in the face of market difficulties.
• Roughly 340,000 sqm of Modern RBW is set to enter the market in 2024, coming from projects developed by BWID, SLP and Cainiao. As the market continues to expand while demand has not completely recovered, it will most likely be tenant-favourable in the near term.