All-purpose IPs all the rage in property arena

All-purpose IPs all the rage in property arena

Vietnam’s integration into the global economy and the global shift in manufacturing have increased the presence of foreign industrial developers in the country, especially in large-scale industrial parks combining urban development areas and services.

There is increasing demand for diverse developments that cater to people who work in industrial parks

The combination of industrial complexes with urban and service development was originally born to ensure the sustainable development of industrial parks (IP), according to Nguyen Manh Ha, deputy chairman of the Vietnam Real Estate Association.

“Apart from the core function of the IP, we can also see the creation of research and development centres, startup facilities, education, and healthcare services, as well as urban and leisure facilities,” Ha said. “They are often located in satellite cities to reduce population densities in some cities and provinces.”

Nguyen Dinh Cung, former director of the Central Institute of Economic Management, agrees. “IPs must be built along with urban areas to serve for the large community who actually work in these locations,” Cung said.

In September, Becamex and VSIP started the construction of Becamex-VSIP Binh Dinh Township and Industrial Park, with expectations of beefing up the region’s development.

Covering 1,425 hectares, Becamex-VSIP Binh Dinh Township and Industrial Park will include a 1,000ha IP. This large-scale VND3.3-trillion ($2billion) project will be home to 150,000 people. The IP is designed to be green and sustainable, enriching its top-of-the-line infrastructure with a green park, and a full range of amenities.

Rich potential

According to Nguyen Van Lang, general director of Becamex Binh Dinh JSC, the developer, the project is a testament to the investors’ potential. “We believe there will soon be many new projects in the industrial park,” he said.

Meanwhile in Long An, the 1,800ha Viet Phat IP combined with an urban area started construction in May. Ken Chan, general manager of Surbana Jurong International Consultants, said that the project will offer work-live-play opportunities that will mould residents and workers into a true community while connecting people to the natural environment.

Le Thanh, chairman cum CEO of the developer Tan Thanh Long An Investment Development JSC, said the project aims to tap into investment that would return to Vietnam after the coronavirus pandemic.

“The US-China trade war and COVID-19 have greatly influenced foreign investment flows,” Thanh said. “This is a very good opportunity for Vietnamese businesses to cooperate and receive investment flows from leading and international partners.”

Located in the southern province of Long An and funded by TIZCO JSC and Vietnam Innovation Parks Group JSC, Viet Phat IP is one of the largest IPs in Vietnam so far.

Strategic considerations

The Vietnamese industrial property market is attracting increasing investments from foreign investors despite the complexities of 2020.

SEA Logistic Partners (SLP) and China’s GLP earlier this month announced a partnership to develop modern logistics real estate in Vietnam, initially focused on greater Hanoi, Ho Chi Minh City, and its nearby provinces.

Kent Yang, a founding partner of SLP and former president of GLP China said with a population soon reaching 100 million people, Vietnam has a large domestic market and a growing middle class to work with.

“Many Vietnamese people are digital consumers, spending approximately seven hours a day online. These factors and trends have made online shopping more accessible to a larger portion of the population and is driving demand for more efficient and more modern logistics warehouses in the country,” Yang said.

Moreover, Vietnam is poised to benefit from further diversification of the global supply chain and manufacturing, which will fuel demand for logistics infrastructure to support operations of both local and global companies according to Chih Cheung, another SLP founding partner.

LOGOS, a growing logistics developer headquartered in Sydney, announced its entry into Vietnam in August with the first acquired project of a 13ha development located in Bac Ninh province. The company is going to pour an initial capital of $350 million into the country.

Vietnamese industrial property has also received attention from Gaw Capital Partners and NP Capital Partners. The two private equity fund management companies have set up their first IP, Gaw NP Yen Binh, in a 13-ha area located in Thai Nguyen city in the north of the country. It is set to come into operation in 2021. The joint venture will fund industrial properties in strategic locations with modern design to serve the strong demand from export-import businesses and companies serving the booming e-commerce and retail scene.

Drawing on Gaw Capital Partners’ global track record of developing and operating almost one million square metres of industrial space, Gaw NP Industrial will offer services for warehousing, leasing, and managing assets. Its target tenants are investors and manufacturers in machinery, electronics, automobile, and garments.

Glenn Hughes - Head, LOGOS Vietnam The trade war between China and the US, decentralisation of supply chains coming out of the COVID-19 lockdowns, impacts on supply chains, and the natural evolution of the Vietnamese market is delivering strong growth opportunities within Vietnam’s logistics sector. We expect the logistics property industry to grow strongly here as the wider economy grows and the industry moves towards an efficient modern real estate market. We are seeing strong capital interest in emerging markets such as Vietnam, and recently launched our first Vietnam Venture with an initial portfolio target of $350 million in gross asset value. We are also already making preparations for further Vietnam Venture commitments as we build towards meeting our 3-5 year business plan targets. We expect to see continued interest from international and local service companies and e-commerce players for entering Vietnam and/or growing their platforms. LOGOS will continue to work with our current and new customers as we deliver modern, high quality facilities to the market. In order to utilise all opportunities and drive manufacturers to come to the country, Vietnam must be able to secure good locations for logistics property near urban areas. However, proximity to key ports and airports is critical to attracting new operators and being able to secure good locations will help customers gain as they expand or consolidate their operations. Jack Nguyen - Partner, Mazars in Vietnam Even before the US-China trade war started a couple of years ago, many foreign investors were already looking to other countries in Asia to set up their business. Vietnam is an ideal alternative country for investors to set up their manufacturing. There are many reasons for foreign investors to choose Vietnam, including its geographic position, open-door policy, its young and entrepreneurial population, and its political stability. The recent geopolitical tension between the US and China will definitely increase the movement of some manufacturers/suppliers out of China to other countries, including Vietnam. This opportunity has pushed Vietnam to the forefront of investors’ radar. As more investors set up here, the country will certainly benefit in infrastructure improvements, human resource development, and access to best international business practices. I fully expect capital investment to continue to flow into Vietnam. There is a lot of “dry powder” available in the region and a lot of these deep-pocket investors are all looking to invest. Even with the business restrictions during COVID-19 this year, Vietnam is one of few countries in the region still exhibiting positive economic growth. The country was well on the road to tremendous economic development even before COVID-19 happened. When it is over, Vietnam should rebound relatively fast and continue its economic growth in the range of 6-8 per cent annually. Recent free trade agreements with Europe and other countries will also drive economic growth in the next few years. Vo Sy Nhan - Co-founder and CEO, Gaw NP Industrial There are many domestic and foreign developers participating in ready-built real estate. In the medium to long term, demand will remain high due to investment movement from other countries to Vietnam. However, investors and developers participating in this field are concerned with the hiked price of land. If the land price is too high it will affect investment efficiency and this would reduce the competiveness and discourage future investment. There is a now trend of industrial property developers offering green industrial parks. We have just introduced GNP Yen Binh, located in Thai Nguyen province. It is designed with smart and modern facilities which are up to international standards with clean and green materials suitable for the local climate and condition. We are expanding more investment into other regions, including Hung Yen province, Haiphong, and some other provinces in the south.

VIR