FDI ‘eagles’ shifting to key industries, not leaving Vietnam: Cushman & Wakefield

Major foreign investors are not leaving Vietnam, but shifting investments to key industries like semiconductors and artificial intelligence, said Trang Bui, country head of Cushman & Wakefield Vietnam.

“There is a wave of downsizing and relocating factories but it does not mean the ‘FDI eagles’ are leaving Vietnam,” she said at a press conference on Wednesday. The press meet focused on real estate developments in HCMC and its vicinity in the first half of the year.

Foreign investors downsizing or expanding was inevitable, given difficulties in the world economy as well as developments in the Vietnamese market, she said.

According to Trang Bui, Vietnam’s southern industrial property market was experiencing scarce supply of land funds, but its ready-built factory segment was thriving.

"There is a land fund scarcity when the Vietnamese market is in the early stages of the first land rental cycle, forcing investors to make recalculations and find solutions,” she said.

When FDI rises and flows into the manufacturing and processing industry, investment competition will become intense in the semiconductor field, she noted.

The semiconductor and AI race in the Asia-Pacific region is fierce, with India holding the advantage with many preferential policies even as Vietnam has emerged as a bright spot in the market, Trang Bui said.

“We can see the contraction of some brands like Unilever but that's because similar domestic corporations like Masan are doing well and taking over the market,” she stressed.

On the other hand, international semiconductor businesses are expanding, she said, adding that C&W Vietnam has been working with many U.S. partners who want to expand their operations in the Vietnamese market. "The outlook for Vietnam’s industrial real estate market was still very bright."

She noted that the Thu Thua Industrial Park in the southern province of Long An has been inaugurated, supplying the market with about 115 hectares of rental area. Its developer, BW Industrial, has also launched two ready-built factories and warehouse projects in the southern industrial hub of Binh Duong, covering 300,000 and 19,000 square meters, respectively.

Positive market sentiment pushed net absorption of industrial land to 79 hectares in the first six months, with the provinces of Binh Duong, Long An and Ba Ria-Vung Tau each recording transactions of more than 20 hectares.

Meanwhile, ready-built factories saw absorption of 172,000 square meters, mainly in Binh Duong province; and ready-built warehouses of about 74,000 square meters.

According to the US-headquartered commercial real estate services firm, market demand recovered thanks to new FDI capital flows into Vietnam and increased domestic consumption. Demand came from a variety of industries, from traditional industries such as plastics, vehicle manufacturing and animal feed to high value-added industries like electronics and pharmaceuticals.

Amidst this demand, the average primary offering price of industrial land was $176 per square meter per lease cycle, an increase of 2.9% quarter-on-quarter and 4.8% year-on-year.

Factory rents increased 1.1% quarter-on-quarter and 2.5% year-on-year to $4.7 per sqm per month. The average warehouse rental price hit $4.5 per sqm per month, up1.2% year-on-year.

Trang Bui said that her firm estimated that in the next three years, about 6,200 hectares of industrial land will be offered in the southern real estate market. The market for ready-built factories and warehousing will see supplies of 1.4 million and 1.9 million square meters, respectively, with 55% of this in Dong Nai province, where the Long Thanh International Airport is located.