FDI fuels industrial land rental

Investment from foreign companies has been the driving factor in the recent industrial property market boom           

According to Tran Duy Dong, deputy director of Economic Zone Management Department under the Ministry of Planning and Investment (MPI), improved FDI attraction has pushed the industrial property market forward.

“Investment in industrial zones last year revealed positive trends. Giants such as Samsung and LG have had their investments echoed, with satellite projects following in their wake,” Dong said in a seminar on investment promotion to industrial zones (IZs) in Vietnam late last year.

The MPI’s Foreign Investment Agency reported that the total newly committed foreign direct investment (FDI) to Vietnam reached $21.6 billion in 2013, up 54.5 per cent year-on-year. Around 80 per cent of this figure was focused on the manufacturing sector, driving demand for industrial locations.

Samsung Electronics invested in a $2 billion factory in Yen Binh IZ in the northern province of Thai Nguyen and is currently expanding its $1 billion factory in Yen Phong IZ in the neighbouring Bac Ninh province. Meanwhile, LG Electronics also invested in a $1.5 billion electronics factory in Trang Due IZ in the northern port city of Haiphong.

“When a foreign investor builds a factory in Vietnam, it’s best for them is to build it in an IZ. We’re upbeat about the development of IZs in the year to come, as FDI projects predicted to come into the country are on the rise,” said Nguyen Thanh Phuong, general director of South Dinh Vu IZ in Haiphong.

CBRE Vietnam forecasted that the IZ real estate market would remain busy because Vietnam had emerged as an attractive destination for foreign investors.

With good infrastructure, good logistics networks and proximity to China and international ports and airports, Hanoi and Haiphong will remain attractive IZ destinations. 

“With LG’s recent announcement, it is anticipated that a shortage of ready built factories in Haiphong will occur,” CBRE Market Review cited.

The last quarter of 2013 saw more US investors seeking investment opportunities in Vietnam as the anticipated Trans-Pacific Partnership trade agreement is slated for signing this year.

Vietnam is currently home to 185 IZs and export processing zones (EPZs), with 104 others in the pipeline.

In the south, Dong Nai has received more enquiries for both land and ready built factories due to existing and fourth coming infrastructure improvements such as the Long Thanh - Dau Giay highway.

In the north, new investors have tended to move either to Hai Duong or Hung Yen provinces, to take advantage of cheap labour or to IZs in Haiphong where tax incentives are available.

“With the incoming factory from LG Electronics, land leasing and factory leasing prices in this and the surrounding area may increase in 2014,” CBRE predicted.

Several regulations intended to improve the investment climate took effect from January 2014, and FDI figures are likely to remain positive, with a focus on business process outsourcing, IT and fast moving consumer goods sectors.