FDI wave offers big opportunities for real estate firms
A rising wave of foreign investment in Vietnam, especially in the manufacturing and processing sector, has given great opportunities for real estate firms to develop the industrial property segment.
The Foreign Investment Agency under the Ministry of Planning and Investment reported that the processing and manufacturing sector continued to retain its top position in attracting FDI capital in the first half of 2018, with US$7.91 billion.
Vietnam’s industrial property market is in the nascent stages of development.
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The rising investment flow means increased demand for workshops and great opportunities for real estate developers, he said.
The industrial property market in Vietnam, including industrial land, ready-built factories, warehouses and other logistics properties, is in the nascent stages of development.
Trang Le, JLL Vietnam’s research and consultancy manager, said that given the country’s improving market fundamentals, Vietnam is in a good position to win the market share as its regional peers shift towards more mature industrial development.
Attractive destination
Vietnam has attracted companies renting industrial property due to low cost as well as strategic location, strong economic growth and development of the middle-class, according to JLL Vietnam.
One of the main reasons that make Vietnam remain an attractive destination for industrial and logistics development is the country’s advantageous geographical position, with access to the world’s major seaborne trade routes that offer the country huge opportunities to develop its maritime transport.
In addition to this, the country’s proximity to China makes it a worthy option for manufacturers looking at alternative locations in the Southeast Asian region because the operating cost in China has been continuously increasing in recent years.
Moreover, Vietnam has gained strong economic growth over the past few years. The key drivers of this growth are urbanization, foreign direct investment, growth in the manufacturing sector and growth in the middle-income population. These factors have created a spillover effect, driving the country’s demand for international transport and logistics services.
As the domestic economy moves from agriculture to manufacturing and services, household income is likely to increase, which will support purchasing power and help the country remain an attractive destination for both local and foreign investors.
A JLL report released recently showed that Vietnam would continue to be in the top three target markets for international investors, especially those from Japan, South Korea, China and Singapore.
Besides, the country has also become more attractive to foreign manufacturers, their associated suppliers and supporting industries, thanks to its existing variety of tax incentives and low labor costs. This in turn will allow further potential growth in the industrial sector, particularly in logistics services.
In addition, it has signed many free trade agreements (FTAs), including with the EU and South Korea, and recently joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is expected to bring 90 percent of trade tariffs between its 11 economic members down to zero, creating free trade in the Asia-Pacific region. Vietnam is thus a magnet for foreign investors who want to exploit the vast free trade market created by its FTAs and the CPTPP.
According to Alex Crane, general manager of Cushman & Wakefield Vietnam, an American real estate services company, said that it is a fantastic time to be in Vietnam’s industrial and logistics advisory business.
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