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Industrial real estate shows promise

Released at: 15:40, 07/03/2015

Industrial real estate shows promise

TPP and FTAs fuel interest in industrial land.

by Tue Lam

The industrial real estate segment may well be among the industry’s more promising sectors this year.

Mr. Timothy Horton, General Manager of Cushman & Wakefield, told VET that in recent times many large domestic companies as well as multinationals have contacted his office to enquire about industrial land of 10,000 to 15,000 square meters and sometimes as much as 40,000 square meters.

The many agreements Vietnam is expected to sign this year are playing an important role in the uptick in interest. The TPP negotiations are believed to be in the final stages, while Vietnam is also preparing to sign the EU-Vietnam Free Trade Agreement (EVFTA) and FTAs with South Korea and the Customs Union of Russia, Belarus and Kazakhstan. All present opportunities for Vietnam’s processing and manufacturing sector to grow strongly.

Moreover, Vietnam’s high position within ASEAN in terms of attracting foreign investment in 2014 provides a solid foundation for industrial park real estate this year. The development of manufacturing and exports promises a good 2015 for many industrial parks, with profit growth forecast in the range of 7-10 per cent for those near urban areas. Opportunities clearly exist for industrial parks with vacant space and convenient transport links.

According to Mr. Horton, last year saw a number of giants in the electronics industry relocate their plants from other countries to Vietnam, including Nokia, Foxconn and Samsung. Samsung has not only opened factories with billion-dollar investments in three industrial parks but also attracted many satellite investors to the country.

The segment, however, may face problems relating to policies and fees for land conversion, Mr. Horton added. Some investors have complained that they cannot access bank loans because industrial park owners are yet to complete their own paperwork for acquiring a 50-year land rental from the State. Fees for land conversion are one of most pressing issues facing investors. The new land price framework has doubled or even tripled prices since 2009, which is a concern for many enterprises.

For his part, Mr. Marc Townsend, Managing Director of CBRE Vietnam, believes that industrial parks that have foreign investment will play an important role in promoting Vietnam’s processing and manufacturing sector. The government therefore needs to coordinate the management of industrial parks, to help the industrial real estate segment become more attractive to foreign investors.

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