Vietnam industrial real estate market benefits from investors moving production out of China. Vietnam has solidified its position as a secure investment destination by capitalizing on its attractive economic circumstances, which include its strategic location, stable political system, large workforce, and relatively open FDI environment.
Despite recent development across the globe, its GDP growth last year has increased by 2.9%. After larger nations encourage their firms to shift production bases out of China, Vietnam’s property market is likely to see inflows of international investment. Trade disputes between the United States and China are raising investors’ interest in Southeast Asian nations, with Vietnam’s industrial real estate sector being the primary emphasis.
Global corporations interested in Vietnam’s industrial and logistics real estate
Low labour costs and low energy prices have contributed to Vietnam industrial real estate market by having the lowest operating expenditures. Because of its low prices, Vietnam is not only a tempting place for multinational firms to set up businesses, but the government is also actively promoting high-value firms.
“The Vietnamese government has been spending extensively on infrastructure, while also introducing industrial clusters to attract major enterprises in the chain.” said Troy Griffiths, Deputy General Director of Savills Vietnam.
To encourage competitiveness in the region, high corporate tax exemptions and reductions were implemented. Global warehousing behemoths such as GLP, LOGOS, and JD.com will have participated and invested in both the North and South. Vingroup, a Vietnamese real estate developer, has entered Vietnam industrial real estate market as well, with two new industrial parks slated to open in 2021.
Vietnam is preparing for international real estate investment
Foreign investment is expected to flow into Vietnam industrial real estate market as major countries urge their companies to relocate production bases outside of China as a result of the global situation’s consequences.
As the outbreak emphasizes the concentration threat in China, the Southeast Asian nation is set to receive a second dose of tonic from multinational corporations expanding their industrial operations in the region.
Vietnam stands to benefit as the exodus from “the world’s factory” intensifies, increasing its appeal as a viable choice instead of China, following the departure of Apple, Samsung, and their suppliers to alleviate the suffering caused by growing tariffs in the US-China trade war.
Vietnam industrial real estate market in Hanoi and Ho Chi Minh City will gain from supply chain disruption and the rise of trade and political tensions between China and other economic heavyweights. The majority of corporations looking to diversify their manufacturing outside of China have turned to the Vietnam industrial real estate market.
Due to their understanding of the long-term potential of Vietnam’s industrial segment, the Vietnam industrial real estate market has remained confident in boosting prices, sending prices surging in the northern industrial sector. According to experts, demand for industrial property remained strong in the first quarter of this year due to Vietnam’s industrial fundamentals.
The Vietnam industrial real estate market 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 contract, ensuring that all conditions and yearly rental increases are appropriate and in line with the market.
How do investors enter the Vietnam industrial real estate market?
You may enter the Vietnam industrial real estate market in a variety of ways. Location is one of the elements that an investor should think about. Vietnam’s regions differ, with the North, Center, and South providing distinct benefits for various sectors and company types, depending on the needs of investors. For example, the North is ideal for corporations migrating from China, but labour prices may be higher.
Because of its enormous customer base, the South is the country’s economic hub and may offer greater possibilities. The middle is less competitive and is a low-cost destination, but thanks to government incentives in towns like Da Nang, it may be ready for investment. While there are many office structures for entering the Vietnamese market, the representative office (RO) and the foreign-invested entity (FIE) are the most common investment vehicles in Vietnam.
Are there any recent regulatory developments that investors should be aware of?
The government recently ratified the Investment and Enterprise Laws, which will take effect in January 2021. These new rules streamline company registration processes while also updating conditional business lines, investment incentives, and support mechanisms, as well as eliminating administrative clearances for certain kinds of investment projects.
The sealed specimen has been removed, and minority stockholders have been given extra protection. However, it’s worth noting that the Law on Investment now contains a ‘negative list’ for the first time. These are industries where foreign investment is prohibited, such as “debt collection services.” The second kind of business line is conditional business lines, which enable foreign investment but need government clearance in particular areas.
Furthermore, the barrier to foreign ownership has been reduced from 51% to 50%. This implies that if the threshold is set at 50%, the business will be classified as a local business. This also implies that M&A clearance is not required if the transaction does not result in a greater percentage of the target firm being owned by foreign investors.
Vietnam’s favourable location between the West and the East is the most favourable option when considering the “China+1” solution. MNCs will continue to expand their operations into other regions of Asia to save money and avoid production disruptions. ASEAN, as a whole, and Vietnam, in particular, are well-positioned to benefit from this transition and future development.
Savills Industrial, Vietnam’s leading industrial real estate team, promises to provide you with the most up-to-date and interesting information on industrial property investment in Vietnam. Our full-service manufacturing and logistics real estate consultancy is delivered by sector leaders with extensive market knowledge and experience. Our assistance extends from market access through planning and development, leasing, investment, appraisal, transaction, and disposal.