Vietnam’s industrial real estate is undergoing a turnaround to cash in on the rising wave of foreign capital influx and factories moving out of China.
Early last month, a representative from a large China-based engine manufacturer was busy searching for a suitable site to feed their production expansion plan in Vietnam.
“We are looking for a site that is spacious and has the requisite infrastructure to engage in ship and auto engine manufacturing to serve the fast-growing demand in Vietnam as well as in export markets,” said the company representative.
Early this year, TTI, Inc., a world-class leader in power tools, outdoor power equipment, floor care, and appliances from the US, expressed interest in developing a solar panel manufacturing plant and a research and development centre in southern Vietnam.
This movement has pushed their vendors to follow in their footsteps. According to BW Industrial Development JSC, the leading for-rent industrial real estate developer has secured two of TTI’s suppliers at My Phuoc 3 Industrial Park (IP) and is receiving more enquiries from these customer groups. International investors like TTI are creating a strong impulse to drive the development of the industrial real estate market across Vietnam.
The US administration’s fresh announcement of raising tariffs on Chinese imports into the US is threatening the progress achieved in recent negotiations between the two countries.
There is no end in sight for the US-China trade war, which is augmenting the wave of investors moving out of China to avoid impacts on their production plans.
In anticipation of new foreign direct investment streams into Vietnam, global equity fund Warburg Pincus and local partner Becamex IDC last year teamed up to establish BW Industrial Development JSC with an initial seed capital of around $200 million. The fledgling company is expected to satisfy the ever-increasing demand for modern logistics warehouses, as well as build-to-suit and ready-built factories in Vietnam.
“The trend of shifting manufacturing from China to Vietnam is bringing many opportunities for industrial real estate developers like us. We have acquired over 230 hectares of projects over the country in 2018 and will expand by another 170ha in 2019 to meet the rising call from our customers,” said Michael Chan, head of sales and marketing of BW Industrial.
The jump in the number of foreign businesses setting up shop in Vietnam leads to ever-increasing demand for high-specification factories across the country. The trend of leasing out ready-built and build-to-suit factories is, thereby, booming at major IPs in the country.
Ready-built factories are flexible in size, helping investors to quickly set up production, while build-to-suit factories are tailor-made to fit with companies’ business plan and budget, while balancing design and function elements.
Ecco Vietnam managing director Alexander Christopher Falter shared, “We aim to put in place a large shoe manufacturing facility in Vietnam and we plan to build a factory by ourselves. However, Ecco is a cautious company so we wanted to lease ready-built factories in the first five years before taking further steps.”
“We had visited a great many IPs in southern Vietnam before visiting Bau Bang by BW Industrial, where we found ready-built factories with modern and contemporary design, perfectly fitting our requirements. Especially, with active support from the developer, it only took four months since the date we received the business license until we officially began production,” Falter said.
Ready-built factories from esteemed developers prove the best solution to address particular demands from both domestic and foreign businesses at the moment.
Chan from BW Industrial explained that the company offers a wide portfolio of factories that are flexible in size from 500 square metres to meet investors’ abundant demand. “With nine projects located in five key metropolises, we are well-positioned to support investor plans for business development in Vietnam,” he added.
BW Industrial Development JSC has succeeded in courting big local and foreign investors such as Kaidi, Ecco, Condor, and Watanabe Rubber, to name but a few. The developer’s top target is to build up state-of-the art industrial and logistics real estate infrastructure that is best suited to the ever-growing demand from multinationals, logistics providers, and e-commerce businesses.