Industrial real estate developers ready to seize on economic rebound

Amidst the slowdown of the general real estate market, the industrial logistics segment remains a bright spot, driven by the steady flow of foreign direct investment (FDI) capital. The country has attracted over $20 billion in FDI as of September 20, up 7.7 per cent on-year, according to the Foreign Investment Agency under the Ministry of Planning and Investment.

In addition to industry titans such as Samsung and LG, other international manufacturers continue to flock to Vietnam. In September, Apple finalised the relocation of 11 of its audio device production facilities to Vietnam, marking a significant shift in the company’s global supply chain strategy.

Experts from Ho Chi Minh City-based private equity firm VinaCapital have forecast Vietnam’s GDP growth to rebound to 6.5 per cent next year, driven by a recovery in exports, which will in turn be closely accompanied by improvements in the output of the local manufacturing sector. In addition, the comprehensive strategic partnership recently set up between Vietnam and the US signifies an important turning point, which will usher in a new period of development for Vietnam.

Against the backdrop of the bright prospects, industrial real estate developers are ramping up to expand their land stocks to seize the opportunities of Vietnam’s economic rebound in 2024. There has been a recent surge in the supply of industrial parks (IPs) in both the north and the south. According to the global commercial real estate services company, CBRE, three new IPs spanning 528 hectares in Bac Ninh and Hai Duong provinces went into operation in Q1 of this year.

In addition, the VSIP 3 and Nam Tan Uyen 3 IPs in the south are expected to hit the market and offer more than 1,300ha. Furthermore, a total of 5,400ha of IP land, located primarily in Long An (40 per cent) and Binh Duong (27 per cent), is planned to be released in the near future, the CBRE report states.

The for-rent logistics and industrial real estate platform BW Industrial Development (BW) is well-poised for further growth next year with the launch of 10 new projects nationwide in 2023. These aim to meet the growing demand for ready-built factories and warehouses among the domestic and foreign investors that are eyeing Vietnam’s logistics and industrial sectors.

The 10 projects, covering a total gross floor area of one million square metres, are strategically located in regions with excellent connectivity and infrastructure, including Haiphong, Quang Ninh, Ho Chi Minh City, Binh Duong, and Dong Nai. They are a testament to the firm’s unwavering commitment to facilitate making Vietnam a vital link in the global supply chain.

With a profound understanding of the needs of modern tenants, BW focuses on ready-built warehouses and factories that offer investors flexibility and speed to market, as well as lower Capex and time commitments. As a result, BW’s projects have garnered numerous inquiries from potential tenants and recorded high occupancy rates.

While IPs nationwide have reported an occupancy rate of over 80 per cent, with the key Northern provinces reaching 83 per cent and some in the South hitting 91 per cent, according to Savills’s latest report, BW has achieved and maintained a remarkable occupancy rate averaging 93 per cent as of September.

The 10 major projects, which form part of BW’s growth plan for 2023 and beyond, demonstrate the company's long-term goal of staying atop market developments and getting ahead of trends. The plan is strongly backed by international investors, with BW having secured approximately $300 million in the first quarter of the year alone.

The combination of sizable land stocks and an extensive footprint ideally positions BW as a leader in the industry. It currently has over 8.5 million sq.m of industrial land in prime locations under control across 40 projects in 11 key provinces in Vietnam – with over three million sq.m of gross floor area in completed or under-construction properties.

With $2 billion of gross assets under management, BW is currently pioneering and operating Vietnam’s first and largest e-commerce and last-mile delivery logistics cluster, Tan Phu Trung in Ho Chi Minh City, with several more in the development pipeline across the nation’s two key gateway cities.

BW’s CEO Lance Li is bullish on Vietnam’s economic outlook and the potential of the industrial real estate sector. He commented, "With the foresight to capture Vietnam’s economic rebound by Q2/2024, BW has launched multiple projects this year to meet the increasing demands of international manufacturers here."

"Vietnam has been experiencing steady and stable growth, and the strong fundamentals related to its workforce, location, free trade agreements, and economic orientation will continue to be its most significant assets for long-term growth."

“As Vietnam's largest developer of for-rent logistics and industrial properties, BW will continue to maintain its leading market position through organic development and by acquiring high-quality assets and well-situated land parcels,” Li added.

Vietnam is well positioned as the next ideal destination for the large consumption markets in Asia. This is explained by the outstanding growth in spending of the middle class in Vietnam lately. Specifically, just under 10 per cent of the population participating in this class actively shopped in 2000, and this proportion has quadrupled in just two decades.

Built-to-suit warehouses offer cost-efficient and innovative solutions to help improve operations. As e-commerce demand grows, the rapidly growing built-to-suit warehouse model provides an alternative for businesses that need warehouse space.

Vietnam needs additional credit programmes if it wants to entice more international investors, commented Paul Wee, CFO of BW Industrial Development.