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CBRE: Vietnam now popular industrial projects hub

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Covid-19 has caused temporary difficulties for upcoming business plans, but with a long-term investment strategy, industrial real estate in Vietnam is still very attractive. DOANH NGHIEP PHAT TRIEN (BUSINESS DEVELOPMENT)/VIET NAM NEWS

CBRE: Vietnam now popular industrial projects hub

Vietnam has emerged as a popular destination for industrial property projects as increased labour costs, trade disputes and Covid-19 prompt global manufacturers to vary their supply chains throughout Asia, US commercial real estate services and investment firm CBRE Group Inc said.

The Sino-US trade conflict benefited Vietnam’s industrial property market last year as manufacturers began shifting production to alternative markets.

Average asking rents for industrial land in Vietnam increased by as much as 10 per cent, with some industrial parks reporting rent growth of up to 40 per cent year-on-year, CBRE said.

Vietnam Jones Lang Lasalle Co (JLL Vietnam) said land prices in the industrial property segment have reached new levels even though the disease has impacted the land lease process.

Covid-19 has caused temporary difficulties for upcoming business plans, but with a long-term investment strategy, industrial real estate in Vietnam is still very attractive.

In the second quarter of this year, JLL Vietnam recorded rising land prices with an average of $106 per square metre for a lease cycle, up 9.7 per cent compared to the same period last year for the southern industrial property market.

Meanwhile, the rent price of ready-built factories was still stable at $3.5 to $5 per square metre per month, because the contract is only short term for three-to-five years and tenants are also susceptible to the pandemic’s impact.

The recent disruptions have prompted companies to diversify supply chains throughout Asia.

“We have seen some manufacturers moving away from centralised supply toward increased diversification,” said Desmond Sim, head of research, Singapore and Southeast Asia, at CBRE.

“Countries that are already investing in new infrastructure and are more open to attracting industry likely will receive the lion’s share of relocations.

“CBRE also expects to see a shift in trade patterns with this growing focus on diversifying supply chains and production locations,” Sim said.

This trend has already started. While China is the world’s largest export economy by value, China-to-US exports decreased by 12.7 per cent last year, and total trade between the countries fell by $100 billion year-on-year.

Markets that have benefited from this shift include Taiwan and Vietnam, the fastest-growing trade partners with the US.

Total trade between the US and the two markets rose by $18.7 billion and $9.1 billion last year, respectively. Countries outside Asia, such as Belgium, the Netherlands and France, have seen increased activity as well.

Although there are some barriers to entry, including a shortage of industrial land in prime locations and a lack of infrastructure in key areas, Vietnam’s manufacturing industry and industrial real estate market stand to benefit from the rapid changes in global trade and supply chains, as long as trade with developed countries remains a key growth driver, CBRE said.

In addition to infrastructure facilitating the movement of goods and driving demand for logistics space over the long term, CBRE also sees e-commerce growth changing warehousing demand in the Asia-Pacific, including Vietnam.

Total cross-border e-commerce sales in the region are expected to more than double to $389.5 billion in 2023 from $181.4 billion in 2018.

The integration of local supply chains likely will blend industrial and retail real estate, affecting the way goods are warehoused and delivered to consumers.

Bonded warehouses, which enable storage of goods without payment of duty, are increasingly popular amid rising consumer demand for imported products, as they facilitate faster delivery than direct shipping from the country of origin.

CBRE expects an increase in leasing demand for these warehouses, especially in large consumer markets such as China and India.

VIET NAM NEWS/ASIA NEWS NETWORK

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