Expanding Horizons: Fuchs Petrolub’s Commitment to Vietnam
At the end of the first quarter, the German lubrication giant Fuchs Petrolub made headlines by announcing the expansion of its operations in Vietnam. The company has signed a 55-year lease for a 20,000 square meter area at the Phu My 3 Specialized Industrial Park (PM3 SIP) in Ba Ria – Vung Tau Province, strategically located near Ho Chi Minh City (HCMC). This move not only showcases Fuchs’ confidence in the Vietnamese market but also underscores the country’s growing significance as a hub for industrial investment.
With over 90 years of experience in the lubrication sector, Fuchs’ decision to establish a new factory in Vietnam signals a long-term commitment to the region. Kazama Toshio, deputy general director of PM3 SIP, highlighted that this represents the second European company to set up operations in the park, paving the way for additional Western investment. It reflects a trend where international companies are increasingly recognizing Vietnam as a lucrative location for manufacturing and production.
A Surge in Industrial Investment
February marked a busy month in the industrial real estate sector, with companies like Framas and KTG Industrial completing factory lease agreements. Framas, a leading German manufacturer in plastic technology, leased a facility in Dong Nai Province that spans 20,000 square meters. This 10-year deal emphasizes the ongoing allure of Vietnam as a manufacturing base tailored for international firms.
In the logistics and construction segments, a notable development occurred on February 17, when LOGOS and Manulife Investment Management announced a joint venture to invest $80 million in a state-of-the-art logistics factory measuring 116,000 square meters. Meanwhile, Singapore-based CapitaLand Development (CLD) signed an MOU to invest $1 billion in Bac Giang Province, aiming to develop multifaceted industrial zones focused on logistics and urban areas.
The northern Quang Ninh Province saw an acquisition by New York-based BW Industrial Development JSC for the DEEP C industrial zone, spanning around 74,000 square meters. These developments indicate a robust appetite for industrial space across various sectors in Vietnam.
Northern Investment Boom
The fervent pace of foreign direct investment (FDI) continued as northern Thai Nguyen Province attracted an impressive $924 million in just the first two months of the year. A significant contributor was a $920 million investment by Samsung Electro-Mechanics Vietnam Co. Ltd., raising the total investment in Yen Binh Industrial Park to a staggering $2.27 billion. This influx underscores not only the demand for manufacturing capabilities but also highlights Vietnam’s strategic importance in global supply chains.
Simultaneously, Denmark emerged as a prominent investor in Binh Duong, another region bordering HCMC. With an investment of $1.3 billion, Denmark accounted for a remarkable 78.9 percent of the total registered capital. This figure includes a noteworthy project by the LEGO Group in the VSIP III Industrial Park, marking its sixth-largest factory worldwide and solidifying Vietnam’s role in the global manufacturing landscape.
Continued Growth in Industrial Real Estate
As the momentum from the industrial real estate market surged into the second quarter, Taiwan’s HuaLi Group signed an investment agreement for two shoe manufacturing facilities in Hoang Mai I Industrial Park and WHA Industrial Park 1. The anticipated output of these factories is set to be substantial, with plans for production of millions of footwear units.
The rapid increase in international investment is putting upward pressure on industrial land rents, which have continued to rise over the past two years. According to JLL’s report for the first quarter of 2022, industrial land prices experienced an 8.5 percent year-on-year increase due to renewed FDI following the reopening of international travel. The average rental rate for industrial land currently sits at approximately $120 per square meter.
Evolving Market Dynamics
The ready-built factory market is expanding to match the needs of international companies wishing to operate or expand in Vietnam, offering a quick and cost-effective solution to potential investors. Real estate consultancy Savills Vietnam has observed a marked uptick in interest from global industrial real estate developers.
In addition to factories, there is a rising trend in investments related to data and logistics centers, reflecting an adaptation to changing global demands. This is attracting significant attention from large U.S. and European firms eager to explore the Vietnamese market.
Trang Minh Ha, Chairman of North Stars Asia, emphasized that the resumption of international flights and favorable trade agreements are key to drawing even more foreign capital into Vietnam’s industrial real estate sector. Vietnam stands out in Asia for its expansive network of global trade agreements, which encompass countries representing 53 percent of the globe’s GDP.
Competitive Advantages of Vietnam
One of the primary attractions for foreign investors is Vietnam’s competitive labor costs, which remain significantly lower than those in Thailand, Malaysia, and China. In addition to favorable labor conditions, Vietnam boasts the lowest corporate tax rate in the region at 20 percent, alongside various provincial incentives aimed at foreign investors. Industrial land rental rates are also notably more affordable compared to its ASEAN neighbors.
The Vietnamese government’s support package aimed at boosting public investments—amounting to VND350,000 billion ($15.3 billion)—will undoubtedly facilitate the development of infrastructure projects, further enhancing the attractiveness of Vietnam’s industrial zones.
A Promising Future
John Campbell, Head of Industrial Services at Savills Vietnam, anticipates that Vietnam’s economy will continue to grow positively throughout 2022, bolstered by recovering domestic demand and stable FDI flows. The changing retail landscape post-pandemic, combined with government support initiatives and the resurgence of foreign investment, sets a promising trajectory for Vietnam’s industrial real estate market.
With favorable conditions fostering growth, the landscape is ripe for continued advancements in the industrial sector, making Vietnam an essential player in the global marketplace.