Industrial and Logistics Real Estate forecast in Vietnam Industrial and Logistics Real Estate forecast in Vietnam

Vietnam is one of the countries with a stable, developing economy and a large number of young people. During the epidemic, Vietnam was and is currently efficiently controlling the disease, assisting Vietnam in becoming the focus of many international firms. Due to this, Vietnam’s industrial and logistics real estate has become one of the main manufacturing and logistics destinations for investors.

Total foreign investment in Vietnam reached over USD 10.13 billion as of March 20th, 2021, including newly registered capital, adjusted registered capital, and the amount of capital contribution and share acquisition by foreign investors, an increase of 18.5 percent over the same period last year. 

The rise of the retail and e-commerce industries, particularly during this time, has boosted the corporate need for manufacturing, industrial and logistics real estate and storage throughout Vietnam.

Global corporations are interested in Vietnam’s industrial and logistics real estate

Low labour expenses paired with low energy prices have contributed to Vietnam being the country with the lowest operating expenses.

These cheap costs make Vietnam an appealing location for global corporations to establish operations here, and the government is also actively pursuing high-value enterprises by making the business environment more accommodating. 

Troy Griffiths, Deputy General Director of Savills Vietnam, said: “The Vietnamese government has been investing heavily in infrastructure, and, at the same time, has introduced industrial clusters to attract leading businesses in the chain. High corporate tax exemptions and reductions have also been introduced to ensure healthy competition in the region.

Worldwide warehousing behemoths such as GLP, LOGOS, and JD.com have been actively engaged and invested in industrial and logistics real estate in both the North and the South since 2020. Vin Group, a large Vietnamese real estate developer, has also joined the market, with two new industrial parks planned to accelerate the implementation of the first industrial real estate projects in 2021.

Vietnam has a high demand for industrial and logistical real estate

Expansion of current firms and development of new manufacturing facilities, together with rapid supply chain movement, will be the primary drivers of demand in the future years. 

While industrial rentals in some industrial zones with favorable locations have reached high levels, renters will have to hunt for additional land supply in regions other than current industrial hubs. This is why it is critical that you engage with the right industrial real estate firm. 

Furthermore, industrial investors are changing product development to adapt to their current circumstances. The highlights include the use of contemporary technology to manage and run the infrastructure, and also the provision of service packages like legal services and human resources to assist tenants to save time and money in the future. 

This is progressively establishing a new industrial and logistics real estate development model in Vietnam, merging supply and investment, as well as management support services. The industrial and logistics real estate agent can assist in determining whether the asking price is in line with the current market. The industrial and logistics real estate agent will also play an important part in the design of the lease contract, ensuring that all conditions and yearly rental increases are appropriate and in line with the market.

Industrial and logistics real estate, factories, and warehouses in Vietnam are gradually growing

Rents in industrial zones near cities have risen as a result of the unexpected surge in the demand for land, factories, and warehouses. Rising costs continue to be a source of concern for low-value and low-margin manufacturing businesses. For high-value multinational firms such as technology, high-tech assistance, and automated machinery, the present foreign exchange rate remains very competitive.

The majority of Apple’s manufacturing is in China. The tech giant has encouraged its suppliers, which include Taiwanese companies Foxconn as well as Delta Electronics and Pegatron, to shift up to 30% of iPhone production from China. Foxconn, for example, and other contract manufacturers, are establishing themselves in Vietnam. Apple also intends to manufacture 30% of its traditional AirPods in Vietnam rather than in China, and a “substantial quantity” of iPads will be manufactured in Vietnam by mid-2021.

The development of e-commerce means that ‘last mile’ fulfilment has tremendous potential here, and demand will increase for well-located warehouses on central business district boundaries and on important city arterial routes.

Due to rising demand, 2021 will be a perfect chance for new industrial clusters. Many provinces and towns that were not historically industrial centres are now increasing investment in infrastructure, industry, and warehouses to keep up with the new wave of an industry that has exploded globally over the last 25 years.

The Vietnamese government is constantly monitoring the supply of new industrial land and warehousing, and if there’s a potential lack of supply, they tend to approve new locations and investments quickly. 

Possibilities for investors when establishing a factory in Vietnam

1 – Tactical terrain

Vietnam, strategically located in the heart of Southeast Asia, has a one-of-a-kind strategic terrain. Vietnam has a long coastline that borders the East Sea and is near the world’s transportation networks, creating an ideal environment for manufacturing and logistics.

Vietnam’s two biggest cities are Hanoi and Ho Chi Minh City. The northern capital of Hanoi, in particular, provides advantageous industrial and logistics real estate opportunities. The most populous city, Ho Chi Minh City, is located in the south and is recognized as Vietnam’s industrial and logistics real estate powerhouse. 

2 – Trade agreements

Another indicator of Vietnam’s openness to the global economy is the number of trade treaties it has signed to attract foreign investment.

– Participant in the ASEAN Free Trade Zone (AFTA)

– Participant in the World Trade Organization (WTO)

– Signing of a Bilateral Trade Agreement (BTA) with the United States

– Free Trade Agreement (FTA) between Vietnam and the European Union

All of these agreements demonstrate that Vietnam is determined to promote national economic progress and will continue to negotiate trade treaties with nations.

3 –  Investors are encouraged

Vietnam is embracing and encouraging Foreign Direct Investment (FDI). The Vietnamese government offers many advantages to international investors interested in investing in Vietnam, such as high-tech or healthcare firms. 

There is a number of tax advantages for foreign investors:

– The corporate income tax can be reduced or eliminated.

– Exemption from import taxes, such as raw materials.

– Reduction or exemption of land use taxes.

4 – Vietnam is a rapidly developing investment destination

Vietnam’s economic development during the previous three decades has rocketed the country from poverty to middle-income status. As economists predicted, if annual economic growth stays steady at around 7%, Vietnam’s economic development will be equivalent to that of China a decade ago. 

China’s increased labour costs have also increased product prices, presenting Vietnam with an opportunity to become the next manufacturing powerhouse utilizing unskilled labour. This can be seen in how formerly prosperous industrial zones in China are increasingly shifting to Vietnam.

5 – The cost of setting up a new factory in Vietnam is relatively inexpensive

In contrast to many other nations, Vietnam does not require most firms to have a minimum capital requirement. Investors can launch a firm without having a significant amount of money. 

The company needs to raise enough money to pay for the anticipated expenditures of the new firm and manufacturing. 

Conclusion

Given global economic instability and a lack of high-yielding investment opportunities, the Vietnamese economy, and the industrial and logistics real estate market, in particular, are more enticing to overseas investors. As a result of the favorable and consistent macroeconomic growth, investors are shifting from Asia to Europe.

The fast growth in foreign direct investment capital, together with the value chain change, has paved the way for a bright future for Vietnam’s industrial and logistics real estate market. With the relocation of manufacturing facilities from China to Vietnam and the fast expansion of local demand, industrial and logistics real estate in Vietnam has been the top choice for foreign investment.