Vietnam industrial property developers look to reap MNCs’ supply chain diversification gains

Vietnam's industrial real estate continues to attract both domestic and foreign investors looking to benefit from the supply chain diversification initiatives of multinational corporations (MNCs).

This is happening against the backdrop of increased FDI inflows and a fast-growing economy. Total registered FDI capital in Vietnam reached almost $27.72 billion in 2022, and the year’s disbursement set a five-year record of $22.4 billion, up 13.5% year-on-year.

Vietnam was the fastest-growing economy in Asia in 2022 (8.02%) and one of the few economies globally to achieve two consecutive years of growth since the pandemic.

Leading MNCs like Apple, Dell, Google, Microsoft, Amkor Technology and Goertek have placed part of their supply chains in Vietnam in recent years. Global corporations are lured by several advantages including the country’s proximity to China, lower production costs and a young and well-trained workforce.

John Campbell, deputy director, head of industrial services division at Savills Vietnam, said Vietnam's industrial property market was benefiting from global supply chain diversification, a stable local currency, attractive corporate tax rates and a few other factors. Most notably, Vietnam's industrial real estate market has been in a position to take advantage of the “China plus one” trend, he added.

In the northern region, this year’s second quarter recorded a new supply of 238 hectares of industrial park (IP) from two IPs in Hung Yen province, according to Cushman & Wakefield's latest report.

“Maintaining its location advantage and investment attractiveness, the north continues to receive a wave of investment in provinces, led by Quang Ninh and Hai Duong,” said Trang Bui, country director of Cushman & Wakefield Vietnam.

Net absorption in the second quarter was 179 hectares, she said.

The prime asking price of industrial land in the north was $120/m2/lease term, up 3.8% quarter-on-quarter and 9.8% year-on-year due to high demand, according to the property services firm.

The ready-built factory segment received a new supply of nearly 252,000 m2 from three 3 projects in Bac Ninh and Vinh Phuc province. Of this more than 86% is in Vinh Phuc.

Like the IP segment, Q2 demand for ready-built factories remains high at an estimated 84,000 m2, the report says. Bac Ninh and Hai Duong lead the fray in terms of net absorption at 28% and 26%, respectively.

The Q2 regional occupancy rate was 76%, down 4 percentage points quarter-on-quarter and 10 percentage points year-on-year, as the market received a high volume of new supplies.

"In general, the northern ready-built factory segment in the second quarter was busier than in the south thanks to a strong wave of FDI investment," Trang said.

The rent of ready-built factories in the north remained stable quarter-on-quarter at $4.7/m2/month, a slight 1.7% year-on-year increase.

At the end of June, Gaw NP Industrial, an industrial real estate platform under Gaw NP Capital, a joint venture between Hong Kong-based real estate private equity firm Gaw Capital Partners and industrial real estate investment fund NP Capital, introduced the GNP Dong Van 3 Industrial Center at the Dong Van 3 IP in Ha Nam province near Hanoi.

Covering a 16-hectare area, this is a ready-built factory and warehouse project for lease. The Cushman & Wakefield Q2 report did not include this project because it was introduced at the end of the month.

GNP Dong Van 3, scheduled for handover in the fourth quarter, will cater to rising demand driven by the supply chain of neighboring industry leaders like Honda, YKK, Wistron, Qisda, Seoul Semiconductor and other manufacturers from Taiwan, Japan, and South Korea, Gaw NP Industrial said.

It added that the new project built on the success of two previous similar projects: GNP Nam Dinh Vu (17 hectares in Hai Phong city); and GNP Yen Binh 2 (16 hectares in Thai Nguyen). GNP Yen Binh 1 (also 16 hectares in Thai Nguyen) is already operational.

More supply

To maintain their advantages in attracting foreign investment, northern provinces and cities have been rushing to finalize and announce their master development plans so that foreign investors get to make decisions more conveniently, said Trang of Cushman & Wakefield.

As a result, the supply of industrial land in the 2023-2026 period will increase significantly, reaching nearly 5,000 hectares.

Trang said that between 2023 and 2026, the north was expected to receive 1.4 million m2 of factory and 0.7 million m2 of warehouse space. The forecast demand for these two types will be maintained if the region continues to promote its position as an investment attraction magnet, she added.

Meanwhile, Hanaka Joint Stock Company held the groundbreaking ceremony of Gia Binh 2 Industrial Park last Sunday. The project will cover 250 hectares in Gia Binh district, Bac Ninh province, with total investment estimated at VND3.96 trillion ($167 million).

Hanaka expects to hand over clean ground in the fourth quarter of 2023 to secondary investors.

According to Hanaka, investment in the Gia Binh 2 Industrial Park will be in the direction of modernity and advanced technology that will further spur economic development in the southern region of the Duong River and Bac Ninh province. It will seek to attract environmentally-friendly projects using modern technology with priority given to electronics manufacturing, information technology, and high technology.

Leed certification

Regarding future development trends, Pham Ngoc Thien Thanh, head of research and consulting at CBRE Vietnam, said: “We have not seen clear evidence of rental differences at industrial projects certified as ‘green’ in Vietnam, but tenants have started to give preference to projects developed sustainably and focusing on renewable energy.

“Actually, more and more industrial projects in Vietnam are looking for LEED certification."

As of the beginning of July 2023, many industrial real estate projects had registered for LEED certification (a U.S. set of international standards for building energy-saving and environmental-friendly buildings) including: Core5 in Hai Phong; Logos in Bac Ninh; RBW at the Phu Tan Industrial Park in Binh Duong province near Ho Chi Minh City; and RBW at the Xuyen A Industrial Park in Long An province, which also borders HCMC.

As part of the green and sustainable development trend, Singapore’s Sembcorp Industries and leading Vietnamese industrial developer Becamex have announced plans to establish five new Vietnam-Singapore Industrial Parks (VSIPs) with an approximate investment of $1 billion.

The new projects will feature decarbonization solutions such as rooftop solar systems, solar farms (where feasible) and green-certified buildings. These VSIPs are envisioned as smart and sustainable industrial parks with a low carbon footprint. Real-time tracking devices will remotely monitor and manage energy, water and waste use, as well as traffic and security, to allow for enhanced visibility over operations, Sembcorp said.