According to Nguyen Thi Thanh Huong, general director of Dai Phuc Land, as the trade war between China and the U.S. escalates, many investors are withdrawing from China and moving to neighboring countries like Vietnam; and new industrial property projects in Vietnam that are coming online in 2018 and 2019 are perfectly positioned to take advantage of companies expanding from, or moving out of China.
“Foreign investment into Vietnam will strongly increase for a couple of years starting from the end of this year,” Huong said. “This trade war will be an opportunity for industrial properties and storage houses. Development in these property segments will affect several related areas, such as residential properties,”
John Campbell, industrial services consultant of Savills Vietnam, commented that foreign and mainland Chinese companies are racing to secure manufacturing capacity in Southeast Asia. “As one of the fastest growing industrial markets in the region, Vietnam is ready to accommodate the influx of foreign investors.”
GoerJek, a Chinese firm assembling Apple’s AirPods – has notified its suppliers about its plan to transfer production and business operations to Vietnam. In addition to GoerJek, other Apple assembly manufacturers also have similar intentions. Cheng Uei, a Taiwanese firm specialised in manufacturing connecting wires and charger equipment for iPhones, and Petragon, has revealed plans to transfer its manufacturing line to Taiwan or Southeast Asian countries like Vietnam, Thailand, and the Philippines.
Foxconn, one of Apple’s main manufacturers has also shown an interest in moving part of its production to Vietnam in order to avoid the tariffs that the U.S. is placing on “Made in China” goods.
Vietnam’s regional competiveness is driven by the following factors: affordable land prices; favorable corporate income tax rates; a dynamic and low cost workforce; and a geographical location near source and destination markets. The low labor costs continue to attract companies from China, especially those in labor-intensive industries.
Ryan Severino, Chief Economist at global property company Jones Lang LaSalle, commented that as the China / U.S. trade dispute escalates, foreign investors are leaving China to save on manufacturing costs. Severino said: “The trade war will incite many large-scale manufacturers to set up their factory systems in Vietnam. Increasing land rent for industrial properties in China has put forward Vietnam as the next destination for investors, as it is near China and has reasonable labor costs.”
While this expected onslaught of relocating investors is expected to put significant pressure on the industrial property market, it comes just as the market is seeing activities by ambitious newcomers and efficiency improvements from established industrial zones (IZs).
BW Industrial Development JSC, a joint venture between Becamex IDS and Warburg Pincus, was recently established to invest an initial $200 million in an industrial park (IP) in Vietnam to meet incoming multinational corporations and e-commerce companies. The company has bought land for nine projects in five localities in key economic zones, including Bach Ninh, Binh Duong, Dong Nai, Hai Duong, and Haiphong.
In an interview with the Vietnam Investment Review, Greg Ohan, Deputy CEO of BW Industrial said, “In Vietnam, many IPs are at full capacity and are expanding. However, in key industrial areas like in Binh Duong there is not much industrial land available and demand is very strong.”
Other industrial companies and projects of note include:
Amata, a leading Thailand industrial park developer, has two developments in southern Vietnam, in Bien Hoa and Dong Nai provinces. The Amata City Bien Hoa Industrial Park is located on 700ha, 19ha of which is reserved for commercial purposes; while the Amata City Dong Nai stretches over 1,265ha and consists of three elements: a hi-tech park, a mixed-use development, and a service zone. Amata was also licensed in March to build a large-scale smart city project in the northeastern province of Quang Ninh. The project would use 714ha, with the investment capital of $1.6 billion.
Boustead, a Singaporean real estate solutions provider, has entered into a co-operation with Thao Dien Real Estate Corporation to develop leasehold property in the southern province of Dong Nai.
China Fortune Land Development has entered into negotiations to acquire land in the Mekong Delta province of Long An, a hub in the southern economic zone.
Thailand’s WHA Hemaraj Group began work on its $1 billion industrial zone in the central province of Nghe An earlier this year. When completed, the 3,200ha WHA Hemaraj Industrial Zone Nghe An will be the largest industrial zone in north-central Vietnam.
The shortage of land near Ho Chi Minh City is driving developers like Sepzone, TTC, and Saigon Hi-Tech Park to building multi-level factories to optimize land use. Upcoming supply includes Hiep Phuoc Phase III and Vinh Loc 1 Phase III, supplying 500 and 200 hectares respectively.
JLL’s Severino noted that, “Vietnam is establishing itself as the industrial powerhouse of Southeast Asia. We expect the industrial property market to enter into a new phase and climb higher in the value chain in the future, moving away from labor to capital-intensive projects.”