The industrial real estate market is on the new growth track, with the big deals carried out at the key locations.
Vietnam is still an attractive destination
German Framas Group has just rented a 20,000 m2 ready-built factory at KTG Industrial Nhon Trach 2 Project (Dong Nai province). Framas specializes in manufacturing high quality plastic parts for such customers as Nike and Adidas.
Said Mr. Fabian Urban, Framas Vietnam's Director of footwear technology, Vietnam is chosen to open the factory thanks to its superior facilities compared to other locations. “The establishment of the new factory is part of the Group's strategy to develop the footwear sector in Vietnam,” said Mr. Urban.
Meanwhile, Danish jewelry branded Pandora signed a Memorandum of Understanding on May 12 to build a new jewelry crafting facility at Vietnam - Singapore Industrial Park III (VSIP) in Binh Duong province, about 40 km from Ho Chi Minh City.
Said Jeerasage Puranasamriddhi, Supply Manager at Pandora Production Co., Ltd., the new factory will be the company's third production site and the first site outside Thailand.
Reported Cushman & Wakefield Vietnam, as the boom of e-commerce in the recent years, many domestic and foreign investors keep looking for quality logistics real estate to meet the growing demand.
The logistics market will grow dramatically in the next 5-10 years. 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 logistics market growth.
“Before deciding to choose Binh Duong province of Vietnam, we surveyed many countries around the world. Binh Duong province has rich handicrafts and this is a favorable condition for us to attract the human resources for our factories. The advanced infrastructure are available in Binh Duong province and VSIP and we are very grateful to the local government for their support in setting up the factories here,” said Mr. Puranasamriddhi.
The foreign capital invested into Vietnam for industrial and logistics real estate consists of two parts: manufacturing industries and supporting industrial real estate for production, logistics enterprises, Said Ms. Trang Bui, General Director of Cushman & Wakefield Vietnam.
“Currently, the North is benefiting thanks to its proximity to China. With a highly developed infrastructure system and especially a very good connection with China, the Northern Key Economic Zones is considered as an expansion of production and an extension of the producing factories’ supply chain ”, said Ms. Trang.
For the industries, mainly high-tech industries, electronics and consumer industries are in the North.
In the Central region, FDI enterprises are latest incorporation, on the growth track, they are mainly small and medium enterprises, the traditional industry includes preliminary processing and production of consumer goods.
In the South region where the industry was first established, when the economy has just been innovated, it mostly attracted textiles and garment and consumer goods production, furniture production, etc., formed a fairly synchronized good supply chain.
“Currently, there has not been much land fund to supply these industries, the electronics and higher value industries should be prior to the South, labor-intensive industries are not prior" , said Mrs. Trang.
As the statistic result, There have been about 600 industrial parks established and planned in 61 provinces and cities, mainly in key economic regions in Vietnam. Vietnam's industrial park system is the destination of thousands of enterprises from 122 countries and territories.
The picture of industrial real estate development
Thanks to the Government's incentives, competitive labor costs, stable politics, positive economic prospects and many signed free trade agreements (FTAs), the North is considered as the best choice for manufacturers to move out of Chinese market, while they can maintain the distance close to the main factories operating in the neighboring country.
Reported Cushman & Wakefield Vietnam, the Northern region consists of 25 provinces and cities, in which, the total industrial land area in 5 key northern provinces/cities including Hanoi, Hai Phong, Bac Ninh, Vinh Phuc and Hung Yen reached about 10,000 hectares.
Most industrial parks are developed by domestic corporations. There are also the investors from Singapore, Taiwan and Japan engaging in the market very early.
Although starting later than the southern industrial market, the northern key industrial provinces have advantages in attracting high-tech industries. Most of the industrial park projects located in the 5 key provinces have been stably occupied with an average rate of about 80%.
The average rental rate of industrial park land is 109 USD/m2/lease term. In which, the average industrial land rental rate in Hanoi is still the highest compared to the northern provinces, reaching 139.9 USD/m2/lease term.
Said Ms. Trang, the investment focusing on the industry has helped forming a concentrated human source and infrastructure development of this industry in the North. However, focusing on developing only one or two key areas and being dominated by a large amount of tenants, such as Samsung, can lead to the risk of missing competitive opportunities for other enterprises.
The Central region is attracting the attention of international developers thanks to its large land fund, competitive land prices and dense seaport system. Industrial activities are concentrated in Da Nang and Quang Nam.
The industrial sector in the Central region is still, however, slow to develop when being compared to the Northern and the Southern regions. Therefore, this region will possess a lot of potential and development opportunities when the North and South move to a new stage. Most of the industrial parks operating in the Central region are developed by the domestic corporations. The total industrial supply of 4 key provinces and cities, namely Da Nang, Quang Nam, Quang Ngai and Binh Dinh, reached more than 7,500 hectares with an occupancy rate of about 67%. The average rental rate of industrial parks here is still quite cheap, it is recorded at 34 USD/m2/rental period, only 30% of the rent in the North and 25% of the rent in the South.
Da Nang is emerging as a strong destination attracting a large amount of foreign investors. Arevo Inc. from the US intends to invest in a 3D printer factory with a total investment of USD 135 million in Da Nang Hi-Tech Park. Da Nang is also the place where the United States Enterprises’ semiconductor factory is expected to be worth 110 million USD.
Other projects include EPE Packaging Vietnam, invested 300,000 USD by a Japanese corporation in Hoa Khanh expanded Industrial Park; Fujikin Da Nang Research, Development and Production Center, with an investment of 35 million USD, located in Da Nang Hi-Tech Park.
The key industries in the region mainly focus on such industry groups as the food processing industry. In addition, the Central region is also emerging as a hub of heavy industries, oil and gas and energy. Here is also the cradle of traditional light industries such as textiles and footwear, metal, wood and furniture.
Compared to the North and the South, the Central region experiences difficulties in attracting skilled workers, the land fund is, however, still abundant, meeting the development and expansion needs of investors.
Meanwhile, with the advantage of the first industrial development hub, the South always leads in growth rate as well as attractiveness, concentrating a large amount of traditional industries such as rubber and plastic, or textile and garment industries. With the presence of Ho Chi Minh City, the largest city in the country, the southern region is the preferred destination for new manufacturers entering the Vietnamese market.
Ho Chi Minh City and such surrounding provinces as Binh Duong and Dong Nai are considered as the most vibrant economic region in the country. The total area of the industrial land in 5 key southern provinces and cities (HCMC, Binh Duong, Dong Nai, Long An, Ba Ria - Vung Tau) is more than 25,000 hectares, the average land rental rate is about 135 USD/m2/rental period. The occupancy rate of industrial land is 89%. Despite the influence of social distancing in 2021, the demand for industrial space is still high, typically Coca-Cola's lease in Phu An Thanh Industrial Park and Lego's lease in VSIP Industrial Park.
Flexible model development
The supply of ready-built factories in the northern, central and southern key provinces reached more than 6.2 million m2, with an occupancy rate of about 79%. Typical projects completed during the past year include Kizuna high-rise factory in Long An with more than 50,000 m2, or Frasers Phu Tan in Binh Duong with about 40,000 m2 of new supply entering the market.
The ready-built factory market continues to operate effectively, despite the negative impact from Covid-19. In the first quarter of 2022, the average rental rate of ready-built factories returned to the same rate as before the distancing, about 4 USD/m2/month and gained a growth rate of nearly 5% yearly.
Meanwhile, the ready-built warehouse market is still relatively new in the industrial real estate segment, as development follows the activity of manufacturing enterprises. However, the pandemic has formed a positive impact on the logistics market, as of the first quarter of 2022, the supply of ready-built warehouses in all 14 provinces in the North, Central and South reached more than 5.2 million m2, with an occupancy rate of about 90%. As the demand for warehouses arising from supply chain disruptions last year, the average rental rate of ready-made warehouses has experienced a positive growth. In the first quarter of 2022, the average rental rate of ready-built warehouses reached 3.4 USD/m2/month.
The positive growth in the industry has helped increasing the supply momentum to meet the demand from the domestic and foreign enterprises, as domestic manufacturing enterprises have used more logistics services. Similarly, the average rental rate is expected to increase in the coming period, due to the demand for new projects and higher standards of the enterprise.
During the past years, Cushman & Wakefield has recognized an increase in home and office flexible space operators entering the market, so it is only a matter of time before we see a flexible model applied to the industrial real estate segment. Especially, in the context of strong demand from the e-commerce sector, which requires a small/flexible warehouse to deliver the fastest "last mile". “The flexible warehousing model will be successful and it is expected there will be investors involved in developing this model in Vietnam soon”, commented the experts of Cushman & Wakefield Vietnam.
Source : Baodautu
