WELCOMING FDI WITHDRAWAL FROM CHINA: DOES INDUSTRIAL RENTAL RENT INCREASE?

The Taekwang factory in Can Tho, the largest FDI project at this time, was designed and constructed by AZB Joint Stock Company.

 

Rents and occupancy rates of industrial real estate increase

When multinational corporations stepped up the process of diversifying investment locations and relocating their production facilities after the Covid pandemic – 19, Vietnam was assessed as the country with the most opportunities to become New production center of the world.

 

In this context, Vietnam’s industrial real estate market has been active from the beginning of 2020 to the present, with increasing demand for land and factories from both existing and new tenants.

 

A new report published by CBRE shows that rents and occupancy rates of industrial parks in Vietnam’s major manufacturing cities and provinces are rising amid limited industrial land supply.

 

In the North, the asking rent is from 65 to 260 USD / m2 / rental cycle. In the southern industrial areas, the asking price is about 80 – 300 USD / m2 / rental cycle.

 

Besides industrial land for lease, the market also recorded a good growth in the segment of factories and ready-built warehouses. Supply of ready-built factories continued to grow steadily in both major industrial areas in the South and the North. AZB Joint Stock Company also became the general contractor of the ready-built factory project – BW My Phuoc 3 in Binh Duong in 2018.

 

According to Pham Ngoc Thien Thanh, Deputy Director of Research and Consultancy, CBRE Vietnam, it is expected that by the end of 2020, the total supply of ready-built factories and warehouses in the Northern region will reach nearly 2.0. million sqm of floor for rent (up 25.3% from the previous year).

 

In the South, the total area of ready-built factories will reach nearly 2.7 million m2 (an increase of 28.2% compared to the previous year). After the pandemic is under control, the average asking rent of ready-built warehouses is expected to increase from 4% to 11% over the same period.

 

CBRE experts emphasize that manufacturers and governments alike have an urgent need to rebuild their global supply chains drastically to promote the relocation of production facilities out of China and move to countries with lower costs and more stable environments.

 

Vietnam’s industrial real estate market is showing a strong shift to catch up with new demand trends. Particularly for the warehouse and warehouse market, new developments in ready-built industrial real estate products are taking place very quickly to take advantage of the golden opportunity that is approaching the public real estate market. Vietnam, ”said Le Trong Hieu, Director of Office and Industrial Leasing, CBRE Vietnam.

 

The ready-built factory project – BW My Phuoc 3 was completed and handed over by AZB Joint Stock Company in 2019.

 

Logistics costs remain the highest in Asia, Vietnam needs infrastructure investment, improving land prices

Despite the perception that Vietnam is facing a great opportunity to become a new production center of the world, there are still many concerns about Vietnam’s ability to absorb this wave of FDI shift. In particular, recently, the public rumor of information Indonesia has enlisted to welcome US companies in the area of relocating production from China..

 

This information originates from a news on the Policy Times (India) posted on May 16. Accordingly, the website confirmed in a recent phone call with Indonesian President Joko Widodo, US President Donald Trump decided to move 27 US factories from China to Indonesia.

 

Commenting on this information, Mr. John Campbell – Manager of Industrial Consulting Division, Savills Ho Chi Minh City said: “I do not really agree with the idea that many companies tend to choose Indonesia and Thailand instead of Indonesia. Vietnam, because our research has shown that Vietnam is the most logical and clear choice in Southeast Asia. ”

 

According to John, there are currently many US and Japanese companies gradually leaving the Chinese market, and Vietnam is said to be the first choice to replace this transition.

 

For Japanese companies, they have appeared in Vietnam during the past 20 years with the participation of many large manufacturers. For American companies, even before the trade war, we have witnessed many companies, such as Intel with a $ 1 billion investment in Saigon, and P&G employs over 5,000 workers in Binh Duong province.

 

However, according to Savills experts, Vietnam still has some factors in the field of industry that need to be upgraded and improved, such as infrastructure, logistics, land prices …

 

“Despite a lot of improvement over the past few years, logistics costs in Vietnam are still the highest in Asia. Therefore, although it will take time, the government needs to continue investing more in infrastructure, transportation … because the long-term effect will certainly make this cost greatly reduced. Land prices have also been rising rapidly in the past few years because many countries have decided to shift their focus to the Vietnamese market, causing strong demand, ”John said.

 

On the same view, according to CBRE, time and cost are still the main factors to be considered. For new businesses operating in Vietnam, the capital, cost and time for constructing a standard factory may be higher than the factory built and integrated support facilities.

 

Author: Nguyễn Mạnh

Credit: https://dantri.com.vn/bat-dong-san/don-song-fdi-rut-khoi-trung-quoc-gia-thue-bds-cong-nghiep-leo-thang-20200526060917918.htm

 

 

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