Industrial real estate - investment trend of the fourth quarter 2019

Vietnam's industrial real estate market in the fourth quarter of 2019 is assessed to continue growing strongly due to the US-China trade war.

In the context of the US-China trade war showing no signs of cooling off, proposals on the agreement to abolish a number of taxes on a number of commodity groups are continuously given by both sides to create a basis for negotiations at the summit between the two countries, but the sign of relatively vague feedback made many investors worried, the outcome of the next meeting between the two countries in November 2019 will have a conclusion similar to previous conferences.

Meanwhile, pressure continues to weigh on Chinese businesses, indirectly making the industrial real estate market in Vietnam thrive due to the industrial and commercial shift from this billion-dollar nation to Minimize the impact of the war.

According to the Research Report on Vietnam Real Estate Market in Quarter III / 2019 of Jones Lang LaSalle (JLL) Vietnam noted that many foreign businesses are actively participating in the industrial real estate market in Vietnam. . It can be divided into two groups: One is the group of direct investors who want to invest in industry in Vietnam to avoid the pressure of tariffs, the other is the group of speculative investors who are proactive in anticipating the trend and acquiring summary of industrial land area in industrial zones with beautiful locations, convenient transportation and good incentive policies for investors.

For the first group, there can be a series of big names like Sharp, Brooks Sports, Foxconn ...., specifically:

Sharp Corporation announced its plan to build a new factory in Vietnam by 2020. The amount of investment has not been disclosed, but according to the published information, a subsidiary established to manage the project will have The capital amounted to 25 million dollars

At the same time, US"s king of running shoe - Brooks Sports also announced a plan to transfer production lines from China to Vietnam: "Brooks Sports will transfer most of its production activities from China to Vietnam because Trade talks between Washington and Beijing are still ongoing without any definitive results, "said Brooks Sports CEO Jim Weber.

Foxconn, a component supplier for Apple Group, expanded in Vietnam by acquiring a domestic component factory in July 2019, after being licensed in February. Nikkei Asian Review, nearly 70% of the 33 Chinese companies surveyed are planning to expand abroad and consider Vietnam as a destination.

For the second group of investors, which are real estate enterprises dealing in industrial land infrastructure, investors are also stepping up their acquisition and investment in order to catch up with the trend of trade movement:

A senior leader of BW Industrial (Industrial Development Joint Stock Company), a joint venture between Becamex IDC and Warburg Pincus Group (USA) - investor and industrial park infrastructure investor with industrial land fund Up to 230 hectares allocated at 10 locations located in 6 provinces of Vietnam revealed that it will continue to increase the land fund by 3-5 times over the next 4 years. The purpose is to fully exploit the potential of the industry - e-commerce - logistics market in Vietnam.

BW Industrial said that from October 2018, the time the US-China trade war began to enter a tense period until May 2019, the number of orders from the company"s tenants and warehouses. in Vietnam has doubled.

Reasons for the trade shift from China to Vietnam include two main reasons:

Firstly, compared with China, the import-export tax rate of goods from Vietnam to the US is much better, the diplomatic relationship between Vietnam and the US is also in the period of good development when the capital of Ha Cabinet was selected as the venue for the conference between the two senior leaders of the United States and North Korea

Secondly, in the indispensable requirement of moving trade to neighboring countries, Vietnam is considered a better destination with cheap labor costs and high labor productivity as well as convenient transportation transshipment with large seaports and long border lines.

The underground wave of hunting industrial land in Vietnam is causing industrial land prices to rise, plus the impact of the post-land fever cycle, the cost of renting warehouses and factories also escalates. As of the beginning of the third quarter of 2019, the average industrial land rent in the South and the North in Vietnam was US $ 95 per m2 over the total lease term, increasing by 15.8% and 6.7%, respectively. same period the previous year. This movement is partially reducing the attractiveness due to the low cost in Vietnam"s industrial market.

The Ministry of Planning and Investment stated that disbursement of foreign direct investment in the first half of 2019 reached US $ 9.1 billion, an increase of 8% compared to 2018. There were 1,723 newly registered projects worth 7.41 billion. USD, up 63% over the same period last year.

In fact, US-China trade tensions are only part of the reason for the increase in investment. Free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European Union Free Trade Agreement (EVFTA) also provide great momentum for growth momentum. In addition, the demand for domestic consumer goods remains high due to the rising middle class and abundant labor force.

However, companies already present in Vietnam also raise concerns in finding skilled labor, and supply chains of quality comparable to the goods they have used in China. Many experts warn that the infrastructure will face many challenges to catch up with the growth of manufacturing enterprises turning to Vietnam.

Many infrastructure projects in Vietnam are facing delays due to site clearance and capital flows. To attract more foreign investment, to benefit from the benefits of moving companies, Vietnam will need to improve its infrastructure network and cross-border transactions.