Leasing activity improves significantly, driven by vibrant year-end consumer demand

• In H2 2024, the Southern logistics market achieved a positive net absorption of nearly 180,000 sqm. Buoyant year-end consumer demand has spurred leasing activities, propelling full-year net absorption to roughly 199,500 sqm, a 40% increase from 2023’s figures.
• Amid a sluggish global economic recovery, government policies aimed at stimulating domestic consumption are expected to boost demand growth for supply chain-related services such as storage, delivery and retail, thereby increasing demand for ready-built warehouse space (RBW).

The market welcomes new supply in Dong Nai and Long An

• The market experienced new expansions in the later half of 2024 with over 103,000 sqm of new space in Dong Nai and Long An, developed by BWID and KCN Vietnam. The asset-function conversion strategy continued to be implemented in the face of subdued warehouse demand.
• The market recorded the conversion of 18,600 sqm of ready-built warehouse space to a factory at a large project in northern Binh Duong. Despite this, total modern warehouse supply increased to 2.0 million sqm as of Q4 2024, a 4.4% h-o-h and 5.2% y-o-y increase.

Average asking rent witnesses a slight decline; market yield temporarily move sideways

• The average asking rent witnessed a slight contraction, standing at USD 4.85 per sqm per month, down 0.4% h-o-h but still up 1.8% y-o-y. This was mainly due to direct discounts from projects in emerging areas, which have been facing prolonged dismal leasing performance.
• Capital value is estimated based on gross asking rents maintaining an annual growth. However, a modest dip was witnessed in Q4 2024, attributed to more aggressive stimulus measures through direct discounts offered by underperforming projects.

Outlook: Landlords to continue implementing flexible asset function as an effective medium-term strategy

• In response to fluctuating market demand, landlords are anticipated to continue implementing flexible strategies for ready-built assets, such as converting warehouse space into factories or integrating mixed-use functions, to enhance leasing performance.
• The Southern RBW market is poised for continued expansion in 2025, with approximately 684,000 sqm of new warehouses under construction. BWID leads the contribution of new developments, followed by existing players, namely KCN Vietnam, ESR and new market entrant MEA.