Vietnam industrial property development hot with local, foreign investors

Investors are pumping billions of U.S. dollars into industrial property development in Vietnam as the country has emerged as one of the most attractive destinations for pandemic-induced supply chain relocations.

Foreign investment wave

Outstandingly, Singapore-based GLP, Asia’s biggest warehouse operator, established this January its first Vietnamese logistics development fund, GLP Vietnam Development Partners I (GLP VDP I), with an investment capacity of $1.1 billion. The fund “has received commitments from a well-diversified investor group across Asia, Europe, North America and the Middle East, including pension and sovereign wealth funds, and insurance companies,” GLP said.

The new fund would focus on developing modern and environmentally-friendly logistics facilities in Hanoi, Ho Chi Minh City and satellite localities, with six seeded development sites and a total land area of close to 900,000 square meters.

Besides GLP, Singapore’s YCH Group and Vietnam’s T&T Group are co-developing a $300 million logistics hub, Vietnam SuperPort, in Vinh Phuc province. It is the first project under the Asean Smart Logistics Network, launched in November 2020 to support Asean Connectivity Master Plan 2025. The World Bank’s investment arm IFC is supporting project development.

With its strategic foothold near the capital of Hanoi, the SuperPort will be a key connecting node for global and regional trade, and supply chains between Vietnamese, Chinese, ASEAN and other regional and international markets.

After signing the cooperation deal with IFC in February, YCH inked another with T&T on commitments to jointly develop Phuoc Vinh Dong Logistics Area in Long An province’s Can Giuoc district near HCMC to further support their Vietnam SuperPort project, envisaged as an integrated dry port and advanced supply chain center.

Cainiao, the logistics arm of Alibaba Group, announced this March the development of Cainiao Dong Nai Smart Logistics Park in Dong Nai province, also bordering HCMC. With a total land size of approximately 168,000 square meters, the facility will provide around 90,000 square meters of premium warehouse leasing space. It boasts immediate proximity to vital transportation facilities like the upcoming Long Thanh International Airport and two major seaports Cat Lai and Cai Mep-Thi Vai.

With its prime location adjacent to HCMC and Binh Duong, Dong Nai provides unparalleled connectivity via well-developed infrastructure projects like the Long Thanh-Dau Giay and Ben Luc-Long Thanh expressways, which directly connect Dong Nai and the Mekong Delta region.

"Dong Nai is a well-established industrial and logistics hub that boasts exceptional air, sea and land connectivity, unparalleled manufacturing capabilities, and promising investment opportunities for both domestic and cross-border operations,” said Eric Xu, general manager of Cainiao Smart Hub.

In Long An province, Cainiao is building Cainiao P.A.T. Logistics Park, with 110,000 square meters of warehouse leasing space.

Australian logistics specialist Logos has also selected Dong Nai. This February, it announced a joint venture with Manulife Investment Management to acquire an 11-hectare, build-to-suit logistics asset. The partnership said that upon completion, the property will total 116,000 square meters of modern logistics space valued at over $80 million.

In northern Quang Ninh province bordering China, BW Industrial Development JSC acquired 74,000 square meters of prime land in Bac Tien Phong Industrial Zone, developed by Belgian company DEEP C Industrial Zones. The deal, announced in January, marked the Becamex-Warburg Pincus joint venture’s third collaboration with the Belgian developer in the north.

Lance Li, CEO of BW, said: “This project encompasses 237,455 square meters of land acquired in partnership with Deep C since the end of 2019. As we’ve seen tenants move from Bac Ninh to Bac Giang with Hai Phong’s industrial parks reaching full occupancy, we expect a similar trend among investors to seek space in Quang Ninh.

“Vietnam has emerged as the biggest beneficiary of pandemic-induced supply chain relocations; we see ample room for growth in industrial real estate and will continue to invest heavily in international-grade factories and warehouses across the country,” he said.

Prior, BW had set up a joint venture with Hong Kong-based real estate logistics platform ESR Cayman in May 2021 to build My Phuoc 4 Industrial Park in Binh Duong province next to HCMC. The IP will offer around 240,000 square meters of logistics and light industrial facilities.

Jeffrey Shen and Stuart Gibson, ESR co-founders and CEOs, said at the time of launching the partnership: “Vietnam’s industrial and logistics real estate sector is coming of age. It is one of the most promising markets within Southeast Asia, benefitting from a range of favorable macroeconomic factors, including its high and stable GDP growth rate, growing income level and thus emerging middle class, rapid urbanization and infrastructure development.”

CapitaLand Development, a subsidiary of Singapore-headquartered CapitaLand, this February signed a memorandum of understanding with the northern province of Bac Giang’s administration to build a 400-hectare industrial park, logistics park and township complex with a total projected investment value of $1 billion.

This is the firm’s first industrial real estate development in Vietnam, where demand for industrial and logistics property, in addition to ready-built factories and warehouses, has been on the rise for years.

At present, Ally Logistic Property (ALP), Taiwan’s largest logistics property developer, is eyeing an entry into Vietnam after making a $1 billion investment to develop smart warehousing solutions in Malaysia late last year. “Malaysia is just the start,” stated Charlie Chang, CEO of ALP, adding his firm is set to announce its expansion plans to Vietnam after Malaysia.

Also with $1 billion in investment but for Vietnam instead of Malaysia, Indochina Kajima expects to put this sum into industrial real estate developments in the coming years.

The Indochina Capital-Kajima Corporation joint venture revealed the ambition when launching Core5 Vietnam, a Vietnam-based industrial real estate investment and development platform at www.c5ip.vn in HCMC this July. The platform focuses on the nationwide rollout of world-class factory and warehouse properties for lease in key manufacturing and logistics markets.

“From a global perspective, Vietnam is one of the world’s fastest-growing economies and is underpinned by strong fundamentals, namely a large, young, and growing population,” Kajima Corp executive vice president Keisuke Koshijima said.

“A key to the country’s economic rise within the region is the manufacturing sector that accounts for over a third of Vietnam’s overall GDP and the outlook is attractive given the supply chain shift from China, which has led to several prominent manufacturers relocating to the country. This was highlighted by Apple’s recent shift of iPad capacity to Vietnam, a trend we expect to continue for other electronic giants,” he added.

Huynh Buu Tran, chief operating officer of industrial property developer KCN Vietnam, said: “We recorded a sharp increase in inquiries for production expansion from the end of quarter one of 2022 upon the post-pandemic reopening of Vietnam’s international borders.

“I think what Vietnam should do urgently is develop quality infrastructure connectivity, Vietnamese supply chains and manufacturers,” she said.

Domestic firms in the game

Like foreign investors, Vietnamese corporations are also in the race to bank on Vietnam’s hotter industrial property market while the Southeast Asian nation becomes a new global manufacturing base.

Multi-sector corporation T&T Group earlier this week received a government permit to build a 193-hectare industrial park in Long Xuyen town, An Giang province. Following Deputy Prime Minister Le Van Thanh's approval, provincial authorities have ordered the Mekong province's Economic Zone Management Board to work with the investor on identifying the project's investment capital.

This is the Hanoi-based group’s first industrial park project in the south after it commenced the construction of a $103 million residential and commercial complex in Long Xuyen in January last year.

Novaland, a leading property developer in Vietnam, has recently seen its industrial real estate arm enter the sector. Novaland Industrial Park, the new subsidiary, expects to disclose its first project in Tay Ninh bordering HCMC in this year’s second half.

Novaland said this June world-leading private equity firm Warburg Pincus led a $250 million investment into the HCMC-based group. The major currently has 10,600 hectares in its land bank for planned developments including residential properties in the megacity and neighboring provinces, as well as industrial parks and hotels in major tourist locations, according to Novaland.

Rents on the rise

Industrial land rents (for the whole rent cycle) in the south rose to new peaks during this year’s second quarter, reaching $290 per square meter in Long An and $270 in HCMC, according to real estate service firm Cushman & Wakefield. In Binh Duong, Ba Ria-Vung Tau, and Dong Nai provinces, they rose to three-month highs of $110, $180, and $195, respectively.

While these were the highest rents in each locality, the average rate in the south was $132, the firm said. In the second half, HCMC, Binh Duong, Dong Nai, Long An, and Ba Ria-Vung Tau saw rents rise by 8-13%.

The northern region will see a shortage of industrial land in the second half of this year as demand exceeds supply, Cushman & Wakefield said. This shortage will see average rents increase by 5% over June figures by the year-end, subject to new and expanding FDI manufacturers targeting the region, the firm noted.