Experts say that Vietnam’s industrial park real estate potential is still very large with two main segments to be exploited including land leasing and ready-built factory rental.
Land rent in industrial zones continues to increase
At the recent Vietnam Industrial Estate Forum 2022 conference, most of the speakers said that Vietnam’s industrial park real estate potential is still very large. In which, two main segments will be exploited including land leasing and ready-built factory rental.
Experts of Rong Viet Securities (VDSC) expect land rental prices will continue to increase, not only because the demand is still increasing while the supply is somewhat limited. Naturally, the cost of compensation, as well as the annual increase in land rent, also contributes to the increase in rental prices. In this context, VDSC believes that industrial park real estate developers with available land funds for site clearance compensation and land use fees will benefit more, thanks to low cost while rent increases gradually.
In addition, Vietnam’s e-commerce development potential is still very large, with a low penetration rate and high growth. Currently, the penetration rate of e-commerce in total retail is only 5.5%, which is only the level of China 10 years ago. Therefore, experts highly appreciate industrial park real estate businesses that are oriented to develop ready-made factories, and have available land in the vicinity of urban areas.
According to data from CBRE, the average rent in these areas increased by 13%, 15% and 21% respectively in the fourth quarter of 2021. Industrial park projects within an hour’s commute to the city center saw rents increase from 17% to 32%. Similarly, the supply shortage also occurred in the Northern region.
New wave of FDI
Since the beginning of the year, industrial real estate has welcomed foreign investors to the market. Specifically, the Danish jewelry brand Pandora signed a memorandum of understanding to build a new jewelry manufacturing facility at the Vietnam – Singapore Industrial Park III (VSIP) in Binh Duong province. Germany’s Framas Group leases a 20,000 m2 ready-built factory at KTG Industrial Nhon Trach 2 project (Dong Nai). Fuchs Group, a German lubricant giant, at the end of the first quarter, announced the expansion of operations in Vietnam with the move to lease a 20,000 m2 land area in Phu My 3 Specialized Industrial Park (PM3 SIP) in Ba Ria – Vung Ship to build new factory.
The Central region has also become a destination to attract many new investors such as Arevo Inc. from the US, United States Enterprises or Fujikin Research, Development and Production Center…
Meanwhile, the Northern region continues to attract capital flows from Singapore, Korea, Taiwan and Japan investors – players who entered the market very early and are constantly expanding its scale in the industrial capitals of the North.
According to experts, a new wave of FDI has been booming for the past 5 months, when Vietnam has returned to the “new normal” and brought Covid-19 under control. This opens up many development opportunities for industrial capitals in the coming time.
Sharing the same view, VDSC said that the ability to attract FDI remains and the development of e-commerce promotes the demand for land rental and ready-built factories.
Sharing with the press, Ms. Trang Bui, General Director of Cushman & Wakefield Vietnam, said that new FDI sources pouring into Vietnam’s industrial zones in 2022 are tending to develop in two branches. The first is the manufacturing industry and the second is auxiliary logistics, ie industrial real estate that supports production and logistics.
According to Ms. Trang, with the explosion of e-commerce in recent years, many Asian investors such as Singapore, Japan, Hong Kong, Korea… and a whole group of investors from the US , Europe has also appeared in Vietnam’s industrial real estate market. With a group of investors landing in the Vietnamese market in the period of 2022, there is a tendency to seek higher and higher quality logistics real estate.
CEO Cushman & Wakefield said that Vietnam’s logistics market is still in the early stages of development but has great potential for growth in the next 5-10 years when the Vietnamese Government is stepping up investment in infrastructure. In addition, the strong growth of the middle class with high disposable income and the strong spread of e-commerce will be the driving forces for the development of the logistics market.