Vietnam industrial property supply rises as companies exit China

By Dat Nguyen May 25, 2020 | 10:29 pm PT

Factories seen in an industrial park in the southern province of Long An. Photo courtesy of Long Hau Industrial Park.

Supply of ready-built factories and warehouses in southern Vietnam will increase by 28 percent this year to 2.7 million square meters.

As more companies arrive from China after the pandemic, supply will rise by 25 percent to two million square meters in the north, real estate consultancy CBRE said in a recent report.

It added that the trend of companies seeking to reduce supply chain dependency on China is likely to benefit Vietnam.

"Surging demand from foreign manufacturers seeking to relocate to Vietnam – and a desire to commence operations as soon as possible – are driving demand for ready-built industrial properties," said Thanh Pham, associate director of research and consulting services, CBRE Vietnam.

Hieu Le, director of the firm's industrial leasing services, said demand for warehousing has been mainly driven by e-commerce companies who are expanding storage space and distribution networks.

After the pandemic is contained, the average asking rent for warehouses would increase by 4-11 percent, he noted.

"There is growing consumption and distribution of groceries and fresh foods, which are set to accelerate occupier demand for temperature-controlled storage."

Analysts have said Vietnam’s industrial real estate could benefit from foreign investors moving production out of China.

Apple, Google and Microsoft are reportedly making plans to begin production in Vietnam this year. Customers have found some Apple wireless earbuds AirPods Pro carrying the ‘Assembled in Vietnam’ label rather than the traditional ‘Assembled in China’ tag.

Vietnam’s average industrial land price is 43 percent lower than that of Thailand and 54 percent lower than that of Malaysia, and its corporate income tax rate of 20 percent is among the lowest in Southeast Asia, according to a report by securities brokerage VNDIRECT.

The country’s many trade deals, especially the EU-Vietnam Free Trade Agreement, which is set to come into effect this year, would be another factor in attracting foreign investors, it added.

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.