Growing foreign direct investment and a move up the value chain mean Viet Nam’s industrial real estate sector has a bright future, according to property consultant Savills Vietnam.
“This is very fertile ground,” Troy Griffiths, its deputy managing director, said.
“We see a lot of FDI into Viet Nam from Japan, South Korea, Singapore, and Thailand.”
Last year Viet Nam attracted FDI of US$35.6 billion, a year-on-year increase of 44.4 per cent, with investment in manufacturing and processing FDI making up 44 per cent.
Asian manufacturers want to take advantage of a skilled, youthful workforce and wage levels that are less than half that in China.
Vietnamese workers are also cheaper than their counterparts in Malaysia, Indonesia, the Philippines, and Thailand.
“The Vietnamese government wants to move beyond a low-wage economy and is targeting growth in high-tech manufacturing, renewable energy and smart city projects,” Griffiths said.
"The industrial investment market is in its early stages," he said.
A landmark deal was a sale-and-leaseback transaction earlier this year at VSIP Park, a Viet Nam-Singapore joint venture, which offered a yield of 10.7 per cent.
“The capital markets are very tight, there is not a lot of liquidity, but the VSIP deal is an important one to demonstrate what can potentially be done and the returns.
“Industrial yields above 10 per cent compare favourably with 5-6 per cent for office deals.”
"Foreign investors in Vietnamese manufacturing currently hold their assets on the balance sheet," he said.
This would offer an opportunity to real estate investors as the market matures, he said.
Meanwhile, the logistics-related real estate market is also set for growth due to rising exports, growing domestic consumption and a lack of modern facilities.
“The Government has invested heavily in infrastructure although still more is needed,” Griffiths said.
International third party logistics companies are becoming more active in Viet Nam and expected to drive demand for larger modern facilities.
John Campbell, senior consultant, industrial, at Savills Vietnam, said: “The rise of e-commerce means that ‘last mile’ fulfilment has significant potential here and demand will increase for well-located warehouses on central business district boundaries and near major arterial city routes.” — VNS