Ready-built factory in industrial real estate: avoiding unprofessional investment

December 24, 2020 | 08:50
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Due to increasing demand, the ready-built factory segment in industrial real estate is attracting huge attention from infrastructure investors. However, Nguyen Thanh Phuong, general director of Sao Do Group warns that the development orientation of this segment should be carefully evaluated based on investor capacity and direction of investment attraction.

What is your opinion on the current domestic industrial land fund and thetrend of foreign-invested small- and medium-sized enterprises moving their global supply chain to Vietnam?

ready built factory in industrial real estate avoiding unprofessional investment
Nguyen Thanh Phuong, general director of Sao Do Group

As far as I know, Vietnam's industrial land fund continues to grow. On the other hand, the land bank to serve global investors like Samsung or LG is not as large as it used to be. Vietnam is also expecting to welcome "eagles". By catching only a few "eagles" like LG or Samsung from the new wave of shifting investment, we will definitely achieve great success. The suppliers in the global supply chain of these large investors will follow. The domestic industry will see great opportunities to cooperate with investors in the global supply chain of these large corporations.

To seize this opportunity, industrial park (IP) developers and local governments are required to prepare clean space, synchronous infrastructure, and human resources. Moreover, in the current trend of investment attraction, investors should move towards setting up integrated industrial zone (IZ) and eco-industrial zone models to meet the demands of investors as well as the orientations to luring foreign investment in the upcoming period.

What impact do the above issues have on investment in industrial real estate in Vietnam?

After 30 years of development, IZs and economic zones (EZs) have progressively turned into a preeminent model to attract domestic and foreign investment. Nevertheless, to help IPs catch the shifting investment flows is another story.

Recently, ready-built factories and warehouses are being developed rapidly. This partly reflects the fact that Vietnam is a destination for several global production chains. These ready-built workshops and warehouses are for serving small secondary investors like supporting enterprises in the production chains of large corporations that have been relocating factories to Vietnam.

The latest CBRE report on the industrial real estate market also showed that 2020 is the time of ready-built factories and warehouses in Vietnam. During the COVID-19 boom, the order for ready-built warehouses surged while the demand for other types of industrial properties stagnated or declined due to social distancing. Ready-built factory supply continues to grow in all three regions.

ready built factory in industrial real estate avoiding unprofessional investment
Factory for rent in Nam Dinh Vu Industrial Park

From your perspective, will ready-built factories become the trend for industrial real estate investment in Vietnam?

At present, manufacturers need to rebuild their global supply chains, while at the same time, aggressively promote plans to relocate production facilities out of China. They want to move to countries offering low-cost, stable environment, and especially still close to the Chinese market. Vietnam is considered to be a beneficiary of this movement with a big plus from good pandemic control. Along with the topmost support from the IP’s developers, the policies to support the economy and the market from the government also have many positive signals.

In this relocation, micro- and small-sized enterprises or companies planning to penetrate the market are very fond of ready-built factories and warehouses. They help investors in saving time and money while going quickly into production.

However, investors should limit attracting microenterprises who are unable to lease clean premises and build factories or investors who do not intend to conduct long-term investment, while still in the stage of market exploration to see how far they can penetrate the market. When a change occurs, they could easily evaporate.

ready built factory in industrial real estate avoiding unprofessional investment
Meeting all requirements for utilities and services of investors, Nam Dinh Vu Industrial Park is an attractive destination in Haiphong

What about Sao Do Group? What is your angle on industrial real estate development in the new normal?

There is very real need for ready-built factories and warehouses among our customers. Therefore, we have been cooperating with BW Industrial Development JSC to develop a ready-built factory system. Although, we are still focusing on leasing out clean premises, targeting investors with good capital flows and high technology.

To meet the rental requirements in the new situation, we are constantly improving internal services and utilities so that investors can minimise costs and optimise profits, in addition to support with legal services and finding human resources to always make investors feel secure while exploring investment options.

By Le Thu

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