Industrial Property in Vietnam: Resilience Amid Challenges
The COVID-19 pandemic has posed significant challenges across various sectors, and Vietnam’s real estate market is no exception. However, the industrial property segment is showing resilience, particularly with an increasing demand for ready-built (RBF) and built-to-suit (BTS) factories and warehouses.
Positive Indicators in Industrial Parks
Despite the setbacks from the fourth wave of COVID-19, the industrial property sector has demonstrated growth. In the first five months of 2021, Vietnam saw the establishment of 25 new industrial parks (IPs)—a staggering increase from just six projects during the same period in the previous year. This surge in new IPs reflects a strong vote of confidence from foreign investors, who continue to see Vietnam as a promising destination for industrial development, even amid widespread uncertainties.
E-commerce Boom and Demand for Warehousing
One of the primary drivers of demand for RBF and BTS facilities has been the changing landscape of shopping and consumption habits due to the pandemic. As e-commerce gains momentum, the necessity for warehouses and logistics infrastructure has skyrocketed. The current surge in online shopping is causing e-commerce companies to expand their storage and distribution networks significantly. Consequently, businesses that want to tap into this growing market are increasingly seeking ready-built factories to facilitate quick operational setups.
Shift in Manufacturing Locations
Another crucial factor influencing the industrial property landscape in Vietnam is the shift in manufacturing bases. Manufacturers looking to diversify away from China—whether due to geopolitical tensions, rising costs, or supply chain vulnerabilities—are turning to Vietnam. The country’s strategic location, investor-friendly policies, and political stability render it an attractive alternative for businesses looking to establish or relocate their operations.
Investor Preferences and Market Dynamics
For many investors, particularly small and medium-sized enterprises (SMEs) and foreign businesses exploring the Vietnamese market, RBF and BTS facilities offer a blend of convenience and cost-effectiveness. They enable quicker market entry, allowing businesses to bypass the lengthy process of constructing their own facilities. However, industrial developers need to exercise caution in attracting certain types of tenants, particularly micro-enterprises lacking the capacity to invest in clean premises, or those seeking short-term commitments.
Innovations in Industrial Space: Flatted RBF
At VSIP, a model has emerged to address the evolving demands of the market: the flatted ready-built factory (RBF). This innovative product, launched at VSIP Bac Ninh, epitomizes a multi-tenanted approach that supports individual operations while sharing common facilities. Inspired by a model from Singapore, flatted RBFs not only make effective use of space but also help tenants mitigate challenges related to land acquisition and operational costs.
Sustainability: A Guiding Principle
As the industrial landscape transforms, the emphasis on sustainability is becoming increasingly pronounced. Global companies, often referred to as “eagles,” are gravitating towards partners that prioritize sustainability. For IP developers in Vietnam, this requires a re-evaluation of business practices to align with international standards.
VSIP’s strategic vision focuses on being a “people-centric, environment-friendly Integrated Township Developer.” By embracing smart technologies and committing to environmental stewardship, VSIP aims to support sustainable economic growth while enhancing community welfare.
Towards Smart and Sustainable Industrial Parks
For industrial parks to truly flourish and align with sustainability goals, they must begin to integrate advanced technologies. This evolution will involve embracing industry 4.0 concepts such as IoT, AI, and blockchain to optimize resource usage, minimize waste, and enhance overall operational efficiency.
A sustainable IP must balance profitability with environmental protection and social responsibility. This holistic approach necessitates deploying technologies that support economic growth while also addressing environmental concerns.
The Rise of Eco-Industrial Parks
Eco-industrial parks (EIPs) represent the future of industrial development. Vietnam’s position as a burgeoning manufacturing hub is complemented by a government push for sustainable practices and energy-efficient solutions.
Traditional industrial parks are expected to transition into EIPs, which aim to reduce environmental impact while boosting economic viability. These parks facilitate community engagement and create financial incentives, ultimately enhancing competitiveness and resilience against various risks.
Government Support for Industrial Development
The role of the Vietnamese government in facilitating industrial property development cannot be overstated. They play a crucial role in providing a stable socio-political environment and improving the transparency of policies.
Supportive measures, such as prioritizing infrastructure investments and streamlining administrative processes, particularly regarding land and site clearance, are vital for attracting foreign investment. By fostering a cooperative relationship, the government and industrial developers can work toward common goals that benefit both parties and contribute to Vietnam’s broader economic aspirations.
In summary, Vietnam’s industrial property market is adapting dynamically amidst challenges posed by the pandemic. With the increasing demand for RBF and BTS facilities, a focus on sustainability, and supportive governmental policies, the industrial sector is poised for robust growth in the coming years.