Foreign investors race for Vietnam's industrial properties

They are actively seeking joint ventures with domestic industrial developers or acquiring land and industrial assets.

The wave of shifting production to Vietnam increases

Vietnam has favorable conditions for economic growth including young population and high ratio of middle class, making the country recognised with great potentials for consumer goods consumption. Therefore, this market has become attractive in investors’ eyes.

During the first half of 2019, disbursed capital for foreign direct investment reached $9.1 billion, up 8% compared to 2018. There were 1,723 newly registered projects worth $7.41 billion, up 63% compared to in the same period last year.

Free trade agreements such as Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) are among driving forces for the country's economic growth.

Meanwhile, the demand for domestic consumer goods continues to increase thanks to the rising middle class and abundant labor force.

Alongside, the wave of shifting production from China to Vietnam makes the demand for industrial real estate constantly increases. Although there is no definitive outcome for the trade war, the attractiveness of this market seems to be increasing.

Sharp Corp. announced its plan to build a new factory in Vietnam, while a US shoe production company Brooks Running is moving its production line from China to neighboring countries.

Foxconn, a component supplier to Apple, has expanded its production in Vietnam by acquiring a domestic factory in July. Chinese manufacturers see Vietnam as an attractive investment destination.

According to a survey from the Nikkei Asian Review, nearly 70% of the 33 Chinese companies interviewed are planning to invest outside China. Vietnam is among destinations.

Photo: baodautu.vn

Industrial real estate attracts foreign investors

JLL, an American property consultancy company, commented that property investors are injecting capital to Southeast Asian countries and Vietnam's industrial market has emerged as a bright destination in the region.

According to JLL, industrial assets and logistics assets are receiving the most attention as companies seek to expand and move their factories out of China to avoid the US tariffs.

The current average industrial land rental in Vietnam is $95 per square meter in a leasing term, which is increasing year on year by 15.8% and 6.7%, respectively.

According to Nguyen Thi Van Khanh, senior director, Capital Markets of JLL Vietnam, foreign investors are actively seeking joint ventures with domestic industrial developers, or acquiring operating land and industrial assets. The demand for industrial assets has never cooled off.

Investors have been keeping an eye on this segment for a long time because of its high productivity while labor costs are low in Vietnam. And recent trade tensions have contributed to speeding up the corporate decision-making process.

However, companies already present in Vietnam also raise concerns about finding highly skilled labor, and qualified supply chain. Khanh also warned that the infrastructure will face challenges while catching up with the growth of manufacturing enterprises turning to Vietnam.

“Many infrastructure projects in Vietnam are facing delays due to site clearance and capital flows. In order to attract more foreign investment, Vietnam needs to improve its infrastructure and simplify cross-border transactions, ” Khanh emphasized.