Vingroup intensifies industrial estate focus

The investment will also serve to expand its manufacturing plans.

The biggest listed company in Vietnam has recently increased the charter capital of its subsidiary Vinhomes Industrial Zone Investment (Vinhomes IZ) from VND70 billion ($3 million) to VND6 trillion ($259 million).

In early April, the company requested permission from authorities to spend over VND4.1 trillion ($117 million) developing infrastructure at the 319-hectare Thuy Nguyen Industrial Park planned in a suburb of northern city Hai Phong.

Company leaders said that investment in industrial real estate seeks to tap rising demand of FDI companies.

"Vingroup has identified industrial real estate as a main business in the future as it brings in a regular cash flow," chairman Pham Nhat Vuong said a recent shareholders’ meeting.

Vingroup’s real estate arm Vinhomes, which owns the majority stake in Vinhomes IZ, plans to pour VND10 trillion ($432 million) into industrial real estate in the next two years.

The ongoing Covid-19 pandemic has inflicted major damage on various industries, with tourism and hospitality among the hardest-hit.

Vinpearl, the hospitality arm of Vingroup, posted a pre-tax loss of nearly VND1.7 trillion ($73 million) in the first quarter as it shut down resorts amid the pandemic.

Industrial real estate, however, remains in high demand thanks to companies moving out of China and considering Vietnam as their next manufacturing destination.

The supply of ready-built factories and warehouses in Vietnam will increase by 25-28 percent this year thanks to surging demand from manufacturers for relocation, according to real estate consultancy CBRE.

Another reason for Vingroup’s increased investment is to serve its manufacturing expansion, which it has chosen as a future core businesses.

Nguyen Dieu Linh, chairwoman of Vinhomes, said that the first industrial real estate customers will be suppliers for automaker VinFast.

Some foreign suppliers like South Korea’s LG Chem and Germany’s ZF Group are already present in VinFast’s existing manufacturing complex, also located in Hai Phong.

When the new industrial park is established, VinFast and its suppliers will move there; and VinFast will receive no higher incentives in land lease compared to other customers, she said.

Vingroup targets to have industrial real estate contributing 10 percent of its annual revenue in the future, or around VND15 trillion ($648 million).

Vietnam has 260 industrial parks with an occupancy rate of 76 percent, according to the Ministry of Planning and Investment. Another 75 are under construction.