After Vietnam opened up, many European- and Asian-based multinational giants scrambled to invest in Vietnam's industrial parks to start new production or expand their businesses, showing confidence in the country's growth potential.
At the end of the first quarter, German lubrication giant Fuchs Petrolub announced the expansion of its Vietnam operations by leasing a 20,000 square metre area in the Phu My 3 Specialty Industrial Park (PM3 SIP) in the province of Ba di Vung Tau, which borders HCMC, to build a new plant. With a 55-year lease contract, the German manufacturer, which has more than 90 years of experience in the field, has shown its long-term optimism about Vietnam. Kazama Toshio, deputy general manager of PM3 SIP, said Fuchs is the second large European company attracted by the PM3 SIP industrial park, and many other Western investors are currently in talks with the coastal industrial park.
In February, Framas and KTG Industrial reached a plant lease agreement. Framas, Germany's leading manufacturer of plastics technology, has leased a 20,000-square-meter facility at the KTG Industrial Nhon Trach 2 campus in Ho Chi Minh City's Dong Nai province for 50 years.
On February 17, LOGOS and Manulife Investment Management formed a joint venture to acquire a modern logistics plant with a total area of 116,000 square meters for US$80 million. Meanwhile, Singaporean real estate company Guardian Land Development (CLD) has signed a memorandum of understanding to invest US$1 billion in Bac Giang province to develop its first industrial park in Vietnam and build logistics and processing facilities. Around the same time, New York-based BW Industrial Development JSC acquired the approximately 74,000-square-meter DEEP C industrial estate in the Bac Tien Phong Industrial Park in northern Quang Ninh Province.
In the first two months of this year, northern Taiyuan province attracted $924 million in foreign direct investment (FDI), accounting for nearly 18.5% of the country's total FDI over the same period. The most notable of these is the $920 million investment of Samsung Electric Vietnam Co., Ltd. This increased the total investment capital of the Yen Binh Industrial Park in Taiyuan to US$2.27 billion.
Also in the first quarter, Denmark was the largest investor in Binh Duong Province, which borders Ho Chi Minh City, with an investment of US$1.3 billion, or 78.9% of the total registered capital. In mid-March, Binh Duong issued an investment certificate to the LEGO Group for an investment of more than US$1 billion in the VSIP III Industrial Park project. It is LEGO's sixth largest factory in the world and second largest in Asia, and the first in Jiangsu, China.
Vietnam's opening up measures in 2022 have achieved great results, and the heat of the industrial real estate market continues to heat up in the second quarter. At the beginning of the month, Taiwan's Huali Group signed an investment cooperation agreement with infrastructure investors WHA 1 and Huangmai Industrial Park Phase I. In the Wong Mai Industrial Park in north-central Nghe An province, Huali will build a shoe factory. Construction will begin in June and completion in March 2023. After the factory is put into operation, it will produce 25 million pairs of footwear per year and create about 16,000 jobs.
In addition, at the WHA 1 Industrial Park in Nghe An, Huali will build another $38 million plant on 7.3 hectares of land. Construction of the project will begin in August this year and will be completed in June 2023. The plant will produce 13 million pairs of shoes a year, creating jobs for about 8,000 workers.
The large international investment in Vietnam's industrial real estate market has led to rising rents. Although rents have been rising for the past two years, they still can't stop the investment boom in various countries. JLL's Q1 2022 Industrial Real Estate Market Report shows that industrial land prices maintained strong growth momentum (up 8.5%) as a new wave of foreign direct investment poured into Vietnam following the resumption of flights and the opening of the international border. The average rent for industrial land is $120 per square meter.
The off-the-shelf factory market has shifted to a larger scale to meet the needs of customers, especially those international customers who choose to build factories or expand production in Vietnam but want to save money and time and start operations quickly.
The Vietnamese branch of real estate management consultancy Savills also confirmed that Vietnam attracted many international industrial real estate developers in early 2022. In addition to factories, another branch of industrial plant real estate – data and logistics hubs – is witnessing a new round of growth in high-quality investment. The company said many large companies in the United States and Europe are looking for opportunities to enter the Vietnamese market and are conducting in-depth research and analysis to select suitable locations.
Trang Minh Ha, chairman of consultancy and training firm North Stars Asia, said the resumption of international flights and trade agreements offers a huge opportunity to attract more foreign investment into Vietnam's industrial real estate this year. Ha added that Vietnam is the second largest country in Asia (after Singapore) in terms of the number and coverage of world trade agreements. He noted that the GDP of countries that have signed trade agreements with Viet Nam accounts for 53% of global GDP.
A major factor in Vietnam's large inflows of FDI is low labour costs, which are only 60% in Thailand, 31% in Malaysia and 25% in China. Vietnam's corporate tax is also the lowest in the region, at 20%, and different provinces offer many tax incentives for FDI businesses. Taxes and labor costs aren't the only advantages. In terms of industrial land rents, Vietnam is also very low compared to other ASEAN countries.
Ha said the VND350 trillion (US$15.3 billion) support package provided by the Vietnamese government to promote public investment in projects such as the North-South Expressway and Longcheng Airport will also help significantly reduce Logistics costs in Vietnam, thereby increasing the investment potential of its industrial zones.
John Campbell, head of industrial services at Savills Vietnam, said the Vietnamese economy is expected to grow positively in 2022 as domestic demand recovers and foreign direct investment flows maintain steady growth. Campbell predicts a promising industrial real estate market this year and years to come. Favorable conditions for achieving this include international flights bringing foreign investors back, the government's active support and the ability of domestic businesses to recover and adapt to the challenges of COVID-19, he said.