Infrastructure improvements along with the production shift triggered by US-China trade tensions are set to further leverage growth in industrial production and the domestic industrial property market.
Illustrative photo. (Source: vneconomy.vn)
The Vietnamese industrial property market, which covers industrial land, ready-built factories, warehouses, and logistics areas, is enjoying a number of signs of strong growth. The occupancy rate of operational industrial parks nationwide has reached 73 per cent, while the domestic market has gained major interest from foreign investors amid the increasing trend of shifting their production bases to the Southeast Asian country.
Le Hieu, CBRE Vietnam’s Advisory and Transaction of Office Services, outlined some factors that are driving the development of the domestic industrial property market.
Considerable upgrades have been made to transport infrastructure, especially to expressways that connect industrial parks with nearby deep-water ports. Notably, four expressway sections in the northern region, including Hanoi - Haiphong, Hanoi - Bac Ninh, Hanoi - Thai Nguyen, and Haiphong - Quang Ninh, have helped to speed up the transportation and consumption of materials and goods while facilitating the growth of industrial production and industrial parks at large.
The second impetus to industrial real estate would be backed by new generation free trade agreements, particularly the newly - signed EU - Vietnam Free Trade Agreement (EVFTA). These pacts are hoped to yield fruitful impacts on domestic industrial production, thus raising the demand for industrial land to serve increased industrial production.
Another facilitating factor is the shift of production bases from China to other countries in order to avoid the tit-for-tat tariffs caused by ongoing US-China trade tensions. Southeast Asian nations, including Vietnam, are seen as one of the most attractive destinations for worldwide investors. However, it could take time for these effects to be felt.
These factors are expected to foster domestic industrial production, consumption, exports, and logistics. This would enable investors to give more interest to the industrial real estate market, Hieu said.
There also remains plenty of room to further develop the industrial property market as the country is projected to develop some 500 industrial parks by 2020 which cover a total of 500,000 hectares.
The automobile industry is also forecast to yield positive impacts on the industrial real estate market.
The automobile sector is expected to enjoy strong growth in the near future, largely due to bold moves by domestic firms such as Truong Hai Auto Corporation with an extensive production complex in the central province of Quang Nam, and VinFast with an automobile manufacturing complex in the northern port city of Haiphong.
Foreign-invested automobile firms such as Mercedes - Benz, Toyota, and Mitsubishi Motors, are also eyeing extensive production in Vietnam.
The deeper market penetration made by automobile manufacturers and spare part suppliers point to positive signals for the automobile supply chain, leading to an increased demand for industrial properties.
As such, the industrial property market is predicted to benefit from the development of the automotive supply chain. Real estate developers should be active in seizing the opportunities arising from the future growth of the domestic automobile industry through preparing their supply of industrial land coupled by infrastructure items and logistic services.