Foreign investors are interested in real estate in industrial parks, pushing up land prices

Mr. Stephen Wyatt, General Director of Jones Lang LaSalle Company (JLL) Vietnam, said that foreign investors are interested in Vietnam's industrial real estate. Land prices are pushed to a new price level. In the second quarter of 2019, the average land price in the southern industrial park market was approximately 95USD/m2/rental cycle.

According to a report on JLL's industrial real estate market in Vietnam, there were 335 hectares of land dedicated to industrial production in 1986. This number has reached more than 80,000 hectares in 2018. The spectacular growth thanks to strong economic development, export orientation, free trade agreements signed, and established key economic regions have contributed to the favorable business with abundant labor resources.

Recent US-China trade tensions have led experts to believe that Vietnam will benefit because manufacturers will shift their supply chains from China to lower-cost Southeast Asian countries.

Foreign investors are "targeting" industrial real estate in Vietnam, causing land prices to be "pushed" to a new price level (Artwork)

At the same time, Mr. Stephen Wyatt said that the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Vietnam-European Union Free Trade Agreement (EVFTA) showed that Vietnam always endeavors international integration, this brought many opportunities when tariff barriers fell and created more incentives for Vietnam to re-establish the business environment.

In the current context, JLL observes a growth in the number of foreign investors actively seeking investment opportunities in Vietnam's industrial real estate market.

Accordingly, these investors are particularly interested in 3 ways to enter the industrial real estate market.

The first is renting land from companies operating the industrial park or directly from the management agency.

The next form is to establish strategic joint ventures with reputable local partners, businesses that have the right to use real estate funds and can assist foreign investors in the reimbursement all procedures and business licenses.

Another typical type of market penetration is the sale and subleasing of industrial properties operating with stable income.

The last quarter of 2018 recorded a sale and subleasing of warehouse in VSIP 1, Binh Duong province. Mapletree Logistics Trust spent 725.1 billion dong (equivalent to 31.5 million USD) to acquire the warehouse of Unilever International Co., Ltd. After the acquisition is completed, this property will be leased to Unilever Vietnam for 10 years with an increase in annual rent.

Although Vietnam is one of the industry's most attractive destinations in Southeast Asia, investors may still face challenges in the search for appropriate investment opportunities.

Stephen said strong demand, coupled with the expansion of Chinese producers, has pushed land prices to a new level. In Q2.2019, the average land price in the southern industrial park market was approximately US $ 95/m2/lease cycle, increasing 15.8% over the same period last year. This can create a gap between the expectations of investors and suppliers.

Some of the other important challenges facing Vietnam are infrastructure shortages, although infrastructure spending is quite high when compared to other countries. JLL recognizes that many infrastructure projects in Vietnam must be delayed due to site clearance compensation and capital attraction. Time and costs of administrative procedures, including high documentation costs and inefficient customs procedures when compared to neighboring countries in the region.

According to Minh Thu