A growing number of companies are implementing the “China +1” strategy to spread their production across different locations and reduce the vulnerability of their supply chains. This shift will have a positive impact on the industrial property markets of Vietnam and India.
Vietnam has become the top choice for manufacturers who want to diversify their supply chains, according to Fion Ng, COO of BW Industrial.
“Vietnam has been attracting investors from Japan, South Korea and Taiwan for over a decade, but the pace has picked up in recent years. BW Industrial is a testament to that. We have expanded rapidly in Vietnam since we started in 2018. The pandemic has slowed down this trend in the past two years, but we are seeing a strong recovery in the past two months. The demand for logistics properties from BW Industrial has reached pre-pandemic levels again.”
Krishna, Managing director of CPP Investments, argued that countries would benefit from reducing their dependence on global trade and production networks. He cited India as an example of a nation that has seen a surge in industrial and logistics real estate demand from various sectors such as electric vehicles, electronics, manufacturing, automotive, and FMCG. He attributed this to the government’s financial incentives for manufacturers relocating to India.
He also mentioned that the authorities are improving the infrastructure and connectivity in India, especially in major cities like Mumbai and Delhi, where traffic congestion is a major problem.
Another expert, Chong Chee Keong, who is the general manager of industrial real estate at Frasers Property Vietnam, said that Vietnam would also gain from the diversification of manufacturing giants such as Taiwan’s Foxconn and South Korea’s Samsung. He explained that these companies are facing energy and labor shortages in China, especially in industrial hubs like Shenzhen.
He added that this diversification process has accelerated this year. Frasers Property Vietnam has witnessed an increase in customer demand in the past 3 months.
Benefit from e-commerce
One of the factors that boost the demand for warehousing properties in Vietnam and India is the relocation of multinationals to these countries. Another factor is the growth of their consumer market and e-commerce sector. Vietnam, in particular, has a huge potential for online shopping and fast-moving consumer goods (FMCG).
This is evident from the expansion of Lazada, a Southeast Asian online shopping giant, in its last-mile logistics facilities around Hanoi, after establishing a strong presence in Ho Chi Minh City. Fion Ng, agreed that “e-commerce is undoubtedly a key driver for logistics real estate in Vietnam”. She added that Vietnam has one of the fastest-growing e-commerce markets in Southeast Asia. This high demand for warehousing properties has led to an increase in rents and supply in both northern and southern Vietnam.
According to a report, modern warehouses for rent in northern Vietnam increased by 8.2% last year, while more than 700,000m2 of new space entered the market. In the South, a more developed market, rents increased by 1.2% as 1.7 million m2 of new warehouses came into operation.