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Vietnam’s industrial real estate: High demand, low supply

Vietnam’s industrial real estate: High demand, low supply

Tuesday 16, 08 2022
The booming logistics industry in Vietnam is resulting in a rising demand for logistics real estate. However, the supply for this sector is still limited.

Scarce supply

According to Savills Vietnam, Vietnam's logistics industry is developing strongly, a result of the growth of the e-commerce industry. That is one of the factors that makes the demand for logistics real estate increase sharply.

real estate

A survey by Savills Vietnam Company shows that Vietnam's logistics industry is experiencing significant growth thanks to the development of the national economy, and the manufacturing and e-commerce sectors.

In the report on the emerging market logistics index released by the leading logistics and transportation service provider Agility in 2022, Vietnam ranks 11th in the top 50 countries.

Among ASEAN countries, Vietnam is behind Indonesia, Malaysia, and Thailand. The country is ahead of the Philippines, Myanmar, and Cambodia.

Vietnam's transport and logistics market is estimated to grow at a compound annual growth rate (CAGR) of 7% from 2021 to 2026. The Vietnamese government encourages manufacturing enterprises and attracts investment by establishing industrial and economic zones.

As a result, despite challenges from the pandemic, the logistics industry still thrives due to Free Trade Agreements (FTAs), economic growth, domestic production and consumption, and the boom in e-commerce offer great opportunities.

Mr. Matthew Powell, Director of Savills Hanoi, commented that Vietnam is a destination for many companies in the manufacturing and logistics sectors, especially with the development of the e-commerce industry. That growth is accompanied by increased demand for high-quality industrial real estate.

industrial real estate

Currently, many companies are having a hard time finding locations. Industrial parks and logistics areas, especially around big cities like Hanoi, are experiencing high occupancy rates, in some places reaching nearly 100%. The supply of industrial real estate has not been able to meet the development needs of logistics companies. This gap creates opportunities for international real estate developers to invest in Vietnam.

Foreign enterprises account for 75% of the logistics industry revenue

Vietnam currently has not exploited the full potential of its logistics industry. Most of the participants in this industry in Vietnam are small and medium enterprises, providing low-value-added services.

Among 3,000 warehouse logistics companies, 90% have a registered capital of below 440,000 USD, 5% have a capital scale from 440,000 USD to 880,000 USD, and 5% have a capital scale of over 880,000 USD.

While the domestic market has fierce competition, the market coordinated by foreign companies accounts for a lower volume but makes up for about 75% of revenue.

In early 2022, the international logistics warehouse developer Logos Property entered a joint venture with Manulife Investment Management in the project to develop a modern built-to-suit logistics factory with a total area of ​​more than 116,000 m2 and worth over 80 million USD.

Manulife Investment Management

The appearance of international units has improved the quality of construction and operation of industrial real estate in Vietnam.

Besides, high-tech production and clean industry are becoming the development trend of the industry. For example, Nam Binh Xuyen Green Park in Vinh Phuc concentrated on building landscape, green space, and an integrated 24/7 smart management system. Thereby, the project attracts businesses in the clean production segment, using natural - renewable energy.

Not only are these requirements from investors, but companies in the logistics industries are also prioritizing the said two factors. 

According to Mr. Matthew Powell, Vietnam is orienting the industry to focus on products that bring great added value. High-tech industry and sustainable production are attracting and prioritizing investment capital.

Businesses in this field often have more stringent requirements. Their activities in Vietnam help drive the industry's development towards sustainability, along with improvements in skills.

These points will actively contribute to import-export activities and Vietnam's economy.

However, with the current situation of limited supply, experts said that Vietnam needs to find solutions to promptly meet operational needs and new trends in the field of warehousing logistics.

Vietnam has the potential to develop the logistics industry and become the logistics hub of the region. Government policies and infrastructure are important factors for Vietnam to achieve this goal.

 

Source: vietnamplus, vneconomy

Compiled by VietnamCredit

Tags: vietnam real estate, industrial real estate, logistics real estate, logistics industry, logistics companies

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