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|Vietnam is currently home to 260 industrial zones, with another 75 under construction, photo Le Toan|
According to Nguyen Van Dinh, vice chairman of the Vietnam Association for Realtors (VARS), local authorities must strictly obey the plan on developing industrial and processing zones of their provinces which were approved by the Ministry of Planning and Investment (MPI).
Moreover, local authorities also have to harmonise the improvement of the infrastructure system along with the development of industrial zones (IZs) as it is the most significant factor in deciding the success of any project.
Meanwhile Su Ngoc Khuong, senior director of investment at Savills Vietnam, added that the government is prioritising the high-tech industries so the issue of manpower and skilled workforce to meet the demand of foreign investors in IZs is another problem that needs to be addressed.
According to Khuong, in order to effectively and sustainably develop industrial real estate, the interests between the government and businesses must be harmonised.
Specifically, the government can invest in transport infrastructure, warehousing, as well as logistics and supply chains under the form of public-private partnerships, because the government budget cannot cover it all.
Meanwhile according to Nguyen Tho Tuyen, chairman of BHS Group, the development of industrial property will be in a more important trend this year.
Different from the past when IZ developers simply levelled land sites and then handed them over to tenants, now only synchronised zones can attract good tenants. They must have an all-in-one facility system for manufacturing, accommodation, and entertainment facilities to serve for different demands of the tenants, Tuyen said.
In a January report published by VARS, positive forecasts were made for industrial property, with the market strong and vibrant in many localities. Some outstanding provinces include Long An, Dong Nai, Binh Duong, Binh Dinh, Thanh Hoa, Quang Ninh, and Bac Giang.
As of the end of 2020, Vietnam boasts 260 IZs in operation and 75 others under construction.
The MPI’s Department for Economic Zones Management released that rentals are at a high level in 2020, at $147 in Ho Chi Minh City, $107 in Binh Duong, $98 in Dong Nai, $123 in Long An, and $65 in Ba Ria-Vung Tau.
In the south, rentals are reported around $130 in Hanoi, $95 in Bac Ninh, $83 in Hung Yen, $76 in Hai Duong, and $96 in Haiphong.
Commenting on prospects for 2021, Dinh of VARS said that the movement of manufacturers to Vietnam will continue and so does the demand for industrial real estate in the country.
With positive development prospects, in 2021, a series of new IZs are forecast to open their gates offering completed infrastructure, along with a series of new projects to develop the infrastructure of industrial parks being approved.
Craig A. Duffy - Managing director Fund Management, GLP
Logistics infrastructure is at a nascent stage in Vietnam. Despite the increase in capital flowing into the region, the sector is greatly underserved with logistics space per capita at only 1/40 of the US and a quarter of China.
Vietnam is at an inflection point with the fastest growing economy in Southeast Asia, a large and young population, and the willingness to adopt new technologies. As domestic consumption – especially via e-commerce – and international shipments increase to meet global demand, there will be increasing demand for modern logistics infrastructure in the region.
And the proportion of logistics costs to Vietnam’s GDP is approximately 20 per cent, much higher than the 8-9 per cent in more developed markets, and could benefit from modern logistics facilities and the latest advancements in automation, and robotics.
Glenn Hughes - Head of Vietnam, LOGOS
Given Vietnam’s economic fundamentals and growth potential in logistics, combined with the current and future demand indicated by our customers, we are seeing a lot of opportunities in Vietnam.
While this is driving strong international and domestic interest and activity, we do not believe this will lead to an oversupply of high-quality logistics space in strategic locations within Vietnam. We expect demand for these facilities to remain high as customers work to meet changed consumer behaviours, which are driving e-commerce, and deliver efficiencies across their supply chains.
Through our day-to-day dealings with land developers across Ho Chi Minh City and Hanoi, we do not believe that land development will keep up with customer and developer demand. We have seen a considerable change in land supply in the last two years and believe this will continue to diminish in viable land locations.
Trang Bui - Head of Markets, JLL
There is an increasing amount of foreign capital which is targeting the industrial real estate and logistics sector. We have calculated that there has been approximately $2.2 billion of institutional real estate capital earmarked for industrial development strategies in Vietnamover the next two years. This is very positive growth for the market and will demand a higher level of market practice sophistication.
Vietnam has a significant supply shortage for warehouses and factories, especially modern ones. We see significant opportunities in the warehouse sector, given these strong demand fundaments and there is currently over 1.5 million square metres of active enquiries (30-35 per cent of the existing market). We do not expect an oversupply within the next 3-4 years and demand will continue to accelerate, demanding further scalable warehouse development projects.
Lam Dieu Tam Hieu - Vice general director, Kizuna
Vietnam is one of the attractive destinations for foreign businesses in 2021-2025. Demand for industrial real estate will still be great in the near future, including industrial land and ready-built factories in IZs.
Currently, many developers are putting facilities into operation and supply could overcome demand. Due to the limited land availability of IZs in the southern and northern key economic regions, developers need to expand their portfolio to neighbouring areas.
When Vietnam can reopen its borders, the supply of industrial real estate may not meet the demand. However, in the long term, more competition is expected for local industrial property investors, especially from investment funds and experienced foreign corporations. Therefore, industrial property developers need to improve the quality of technical infrastructure and services, investing in and developing eco-friendly projects.
Bruno Jaspaert - General director, DEEP C Industrial Zones
The increased supply will bolster economic growth and cater for the increased demand we experience from investors. However, this add-on supply will take time to come on stream.
We believe that demand remains high and investors are still eager to move forward. Balancing the activation of new IZs and new concessions might be a tool to prevent oversupply, but the real problem lies in utilities and workforce.
If Vietnam wants to secure its growth, it might be advisable to drip feed supply to prevent speculation and unrealistic pricing. It could also impose deadlines on developers.
Vietnam is gearing up for exponential growth but does not have the land nor the people capacity to fully replace China. Thus, it should aim for specific investors and sectors to use its resources as efficiently as possible. This would help to alleviate the pressure on its land banks and increase its appeal to other investors.