Vietnam's food trade industry is one of the most dynamic sectors in the country. Fueled by an expanding middle class, rising disposable incomes, and shifting consumer preferences, the increasing demand for high-quality food products is undeniable. From bustling markets in Ho Chi Minh City to modern supermarkets in other major cities, the opportunity for both […]
Why is industrial real estate industry trending?
Although international trade is still disrupted by geopolitical uncertainties and disease control policies in some major countries, Vietnam is seen as a bright spot for global investment flows due to its stable political and business environment, as well as the effective implementation of drastic measures to achieve the Government's dual goals of safely adapting to the epidemic and recovering production.
According to Mr. David Jackson, General Director of Colliers Vietnam, industrial real estate rental costs in Vietnam are still 20-33 percent lower than in neighboring Thailand and Indonesia. Because Vietnam's industrial real estate is still in its early phases, the typical benefits of this period, such as land rent or labor prices, will also endure at least 5-7 years.
The "unstoppable" rise of e-commerce will be a significant driver of industrial real estate in the following years. According to the Vietnam E-commerce Association, the compound annual growth rate of this industry's revenue is more than 40% between 2020 and 2025 and is expected to reach 52 billion USD in 2025. When sales reach 25-27 billion USD, it is predicted that 350,000m2 of new warehouse space would be required to suit the demands of this business.
Overview of the industrial real estate market
The industrial real estate sector was the primary leverage of foreign capital inflows in the first quarter. The fact that a Singaporean investor boosted capital for the VSIP Bac Ninh urban infrastructure and service investment project by roughly 941 million USD has helped the overall registered capital of foreign investment in real estate "rise." Singapore maintained its lead in foreign investment flows into Vietnam in the first quarter, accounting for 25.7 percent of overall investment capital in Vietnam with a total registered capital of 2.29 billion USD.
After Vietnam opens to visitors, investment in hotels and resort real estate is expected to return quickly in the final months of 2022, owing to leverage from local resources and international money. As a result, investors such as real estate investment trusts, private enterprises, and numerous individual investment funds are increasing their acquisition of hotel properties in order to catch up with the trend. a rise in tourism Simultaneously, these units boosted the conversion of several hotel buildings into workplaces and shared housing types.
Industrial real estate trends
Encourage public infrastructure investment
The Ministry of Transport estimates that the government will possess 3,000 kilometers of highway by the end of 2025. As a result, the future public investment packages will prioritize the construction of a network of motorways, with a particular emphasis on the North-South expressway.
Both FDI and homegrown enterprises are driving production growth
Vietnam intends to link international commercial flights beginning in early 2022, creating advantageous conditions for investors and professionals to return to Vietnam and encourage investment in the future year. Vietnam has also inked extremely advanced free trade agreements (FTAs) with significant global partners such as the CPTPP, EVFTA, and RCEP.
E-commerce growth, increased inventory demand, and supply chain diversity
According to the Ministry of Industry and Trade, Vietnam's e-commerce income is exploding, with a compound growth rate of 44.9 percent between 2020 and 2025 reaching $52 billion. According to CBRE Asia, revenue from e-commerce of around 25-27 billion USD is anticipated to necessitate an extra 350,000m2 of new warehouse space, amounting to more than 700,000m2 of warehouse space in Vietnam in 2025.
Accelerating new supply expansion in the Red River Delta, North Central, and Central Coast
The land supply for industrial parks in Vietnam is predicted to rise by 44,760ha between 2022 and 2025 to fulfill the increasing demand for industrial park land in Vietnam, which would encourage the expansion of new supply in the Red River and the North Central and Central Coast.
Cold chain real estate
The Cold Chain has gained increasing interest in Vietnam in the past few years. The majority of cold storage services are in operation at over 90% of their capacity. New-generation free trade agreements will stimulate export demand for agricultural and aquatic products to European markets along with increasing demand for cold storage systems. Vietnam seafood stands third in export volume in the world, accounting for the largest area of cold storage. Cold chain supply currently provides 48 facilities, divided into 2 main branches: cold storage with about 600,000 shelves and cold transport with more than 700 refrigerated trucks.
Most of the cold storage is mainly located in the Southern region of Vietnam. 60% of the market share is in the hands of foreign investors, yet, chances remain open to domestic potential firms. The cold chain industry is nascent and still considered as a niche market, but will soon become a key sector. In July 2021, Vietnam's highest cold storage will be in Long Hau, containing 31,000 pallets.
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Development trend in neighboring provinces of Hanoi and Ho Chi Minh City
The asking price of industrial land in Ho Chi Minh City and Hanoi is twice as expensive as in certain adjacent locations, according to CBRE Vietnam's industrial park real estate market study for the third quarter of 2021. As a result, the industrial real estate rental price in Ho Chi Minh City was the highest in the third quarter, at $300 USD/m2 while the highest rental price in the North is in Hanoi at $250 USD/m2.The trend of industrial parks and tenants relocating to the adjacent provinces of Ho Chi Minh City and Hanoi is becoming increasingly apparent as land rent in these industrial hubs exceeds that of neighboring provinces while the industrial land fund is insufficient. At the same time, infrastructural projects under development such as Trung Luong - My Thuan expressway, Dau Giay - Phan Thiet highway in the south, and Expressway Van Don - Mong Cai, Ninh Binh - Hai Phong in the north have greatly enhanced communication between surrounding provinces.
The industrial urban development
The industrial urban park plan will be an exact solution to the problem of worker housing scarcity, indirectly lowering employees' cramped living conditions and lack of facilities. As a result of a new wave of investment in industry in Vietnam, the industrial urban park model will be an unavoidable trend, assisting in the resolution of many difficulties in the conventional master plan, because the majority of the space is covered.
The Vietnam-Korea Economic Cooperation Industrial Park in Hung Yen will be formally created by the end of November 2021. This is a project with a total investment capital of more than 1,780 billion VND, conducted by LH Group, TDH Ecoland Urban Development and Investment Joint Stock Company, and a number of Korean investors. Bac Ninh province, in the northern region, also has the VSIP Bac Ninh industrial park, a classic example of an urban industrial complex with a total area of 700 hectares.
