Vietnam property luring foreign manufacturers

Le Trong Hieu, director of Advisory & Transaction Services of CBRE

Le Trong Hieu, director of Advisory and Transaction Services at CBRE, said that in some northern provinces like Haiphong, Bac Ninh, Hanoi, Hai Duong, and Hung Yen the supply of industrial real estate is around 9,600 hectares with an average occupancy rate of 79 per cent. Meanwhile, in the southern provinces like Binh Duong, Dong Nai, Ba Ria-Vung Tau, Ho Chi Minh City, and Long An, the supply of industrial real estate is around 24,000ha with an occupancy rate of 76.7 per cent. Meanwhile, the supply of ready-built factories and warehouses in the third quarter of 2020 is on an uptrend.

The total supply of ready-built factories and warehouses in the north reached 2.1 million square metres, up 25.3 per cent on-year. For the south, the figure is 2.7 million sq.m, up 28.2 per cent on-year. Meanwhile, there are 2.9 million sq.m of ready-built warehouse space, up 11 per cent against 2019.

“There is a strong increase in new supply in industrial areas. The rental rates of land went up 20-30 per cent on-year and warehouses have increased as well," Hieu said.

Specifically, in some industrial zones in Ho Chi Minh City, the rental rates have increased from $150 to $300 per sq.m for the remaining lease terms. In Dong Nai, the rental rates have increased from $110 to $155 per sq.m. Meanwhile, Long An saw rates go from $110 to $200 sq.m.

Some northern localities also witnessed an increase in rental rates, but the trend was not as pronounced as in the south. In Hanoi, the rental rates have increased from $155 to $260 per sq.m while in Bac Giang they went from $55 to $110 sq.m.

CBRE observed that tenants’ demand mainly centred around Vietnam’s key industries such as electronics, e-commerce, food, livestock, and FMCG. These industries are more developed in Vietnam and investors are looking to use the country as a hub to access new markets. There is also a clear trend of relocation among investors in automobile assembly, with the northern and central regions benefiting. In addition, many investors are looking to develop ready-built warehouses.

C.K Tong, CEO of BW Industrial Development JSC

C.K Tong, CEO of BW Industrial Development JSC, stated that Vietnam is the first destination for foreign capital, prompting high-tech manufacturers to set up and expand their production bases in the country.

“This is good news for both domestic and foreign investors,” C.K Tong claimed, adding that over the last nine months, many enterprises moved out of China and selected Vietnam as their destination.

Besides, there have been several other investors choosing Vietnam as a manufacturing hub. For example, the transformation of Samsung has brought many foreign suppliers to Vietnam.

Therefore, it is essential to transform the whole supply chain. However, enterprises are coping with hurdles regarding capital, finding suitable locations, licenses, and labour force.

Therefore, factories and warehouses are heavily sought after, opening up opportunities for BW Industrial.When choosing factories for renting, enterprises usually focus on flexible rental areas (at least 500sq.m), flexible payment terms, proper cash flow management, construction certificates, simplified licensing process, as well as professional teams to manage the facilities.

"Most recently, we have received a lot of queries from European companies, which have manufacturing facilities in China," he said.

It is worth noting that there is a strong demand for industrial land among furniture producers, which are not traditional manufacturers. In addition, local firms are also interested in expanding their operations and are expected to be a key drivers of industrial real estate development.

Tran Quoc Trung, deputy director general of the Department for Economic Zones Management

Tran Quoc Trung, deputy director general of the Department for Economic Zones Management under the Ministry of Planning and Investment, stated that foreign investors have high demand and pay avid attention to supply chain development.

Fortunately, the country has made some adjustments in the revised Law on Investment to facilitate investors to expand and develop supply chain and supporting industries.

"I hope that with the government’s efforts, more local and foreign investors will join the industrial real estate market," he added.

Pham Ngoc Tung, vice general director of Sales and Marketing of IMG

Pham Ngoc Tung, vice general director of Sales and Marketing of IMG, said that it is possible for Vietnam to expect 6per cent GDP growth in 2021 due to the many positive factors supporting the industry.

The impact of COVID-19 is a lasting one, but Vietnam remains a reliable destination. Highlighting Vietnam's stature in the international economic arena, immediately after his appointment, the Prime Minister of Japan selected Vietnam as his first foreign call.

"Location development will be our primary strategy. Currently, technology has given a great tool of communication for businesses, and we also make the most of this platform. This has helped us make our operations more efficient and attract investors from abroad," he said.