Opportunities in Southeast Asian Logistics Properties Amid Supply Chain Shifts
Supply chain dynamics are evolving fast, presenting a golden opportunity for logistics properties in Southeast Asia. This trend is driven by significant manufacturing and consumption growth in the region. During the recent Mingtiandi Singapore Focus Forum, top executives gathered to discuss how these changes are shaping the logistics landscape.
Growth Models in Vietnam and Indonesia
Fan Li, a partner at Warburg Pincus, highlighted how Vietnam and Indonesia are emulating the growth trajectories of more developed Asian economies like China and South Korea. Improved infrastructure, rising foreign direct investment, and shifting geopolitical dynamics are catalyzing a migration of supply chains from North Asia to Southeast Asia. Fan noted, “Manufacturers are in a much tighter supply chain today… which plays well into how we operate, focusing on providing institutional services to these manufacturers.”
Joining Fan were Fion Ng, COO of BW Industrial, and Kevin Kow, CEO of NWP Property. Both companies, backed by Warburg Pincus, exemplify how regional players are seizing upon these supply chain shifts to meet increasing demand.
The Booming Manufacturing Sector in Vietnam
Vietnam stands out as a powerhouse in the manufacturing realm, boosted by global supply chain diversification and a surge in foreign direct investment (FDI). BW Industrial, touted as Vietnam’s largest pure-play industrial developer, is reaping significant benefits. With over 40 projects across more than 30 locations, the company has become a crucial player in the logistics landscape.
Fion Ng shared insights into the current climate, stating, “Supply chain diversification remains a top priority for our customers. We’ve seen a striking 75% increase in leasing inquiries year to date.” Despite some fluctuations in export orders, BW Industrial boasts an occupancy rate of nearly 95% across stabilized assets.
Established as a joint venture in 2018, BW Industrial has curated a significant land bank of over 8.5 million square meters. The company enjoys collaborations with more than 270 tenants from over 20 countries, primarily in the e-commerce and high-tech manufacturing sectors.
Sustained Demand Driven by FDI
Ng emphasized the sustained influx of foreign direct investment into Vietnam’s economy, which has risen nearly 15% year-to-date. This robust FDI translates directly to demand for industrial and logistics space. BW Industrial is preparing to deliver ten new projects totaling one million square meters this year, with a robust manufacturing sector leading the charge.
Capitalizing on Indonesia’s Consumption Economy
On the other hand, Indonesia presents a unique entry point in the logistics sector, highlighted by NWP Property’s Kevin Kow. He described Indonesia as a remarkable consumption story with a $1.2 trillion USD economy. The country’s consumption consistently comprises about 55-60% of its GDP.
NWP Property, established in 2015, has transitioned from a retail-focused entity to a logistics powerhouse, now managing over 50 developments spanning more than one million square meters of gross floor area. They recently launched a joint venture with a Japanese developer to further establish their logistics platform.
Addressing Logistics Costs in Indonesia
Despite the promise, Kow highlighted a pressing challenge: the high logistics costs in Indonesia, currently accounting for around 25% of GDP. This figure starkly contrasts with 15% in Thailand and single-digit percentages in developed markets like Singapore and Hong Kong. However, Kow sees this as an opportunity; as logistics costs eventually decline, demand for more efficient and modern logistics properties is expected to rise.
A Future of Efficiency
Kow envisions a maturing logistics market in Indonesia that will increasingly demand efficient infrastructure. “We see that logistics will evolve, and tenants will seek out more modern facilities,” he noted, indicating the potential for NWP Property to meet this future demand.
As both Vietnam and Indonesia continue their upward trajectories in logistics and manufacturing, the potential for growth aligns perfectly with evolving market needs and investor interests. Engaging with these developments can provide valuable insights for stakeholders looking to capitalize on this booming sector.