Dec 21, 2018 / 12:38

Growth in automobile sector drives up Vietnam industrial real estate market

A large number of industrial and commercial lease deals related to the automobile sector have been made over the past three years.

The growth of automobile sector in Vietnam over the past years has left positive impacts on the industrial real estate market, CBRE Vietnam said in the latest report. 
Illustrative photo
Illustrative photo
A large number of industrial and commercial lease deals related to the automobile sector have been made over the past three years with anticipated demand for lease extensions in future periods.

Accordingly, real estate developers will see investment chances in the increasing demand for production expansion amid the current limited supply. High occupancy and rising rental rates could also be reasons for them to invest. 

Supported by policies 

Back in the beginning of 2017, the Vietnamese automobile market has witnessed a series of significant events, which are expected to reshape the entire industry. 

The most important events were the promulgation of the government’s decrees dated in October and November 2017 which were designed to support the emerging Vietnamese car manufacturing interests by applying a legal criterion to expand production scale and improve the quality of domestic products.

Another factor supporting the industrial real estate market is increasing industrial land banks. Each region in Vietnam has distinct competitive advantages including land availability.

According to CBRE Vietnam, the role of policy-makers is considered the most vital among many factors to enable the Vietnamese automobile industry to compete with regional rivals. 

Both the government and real estate developers should be involved in a win-win relationship, in which authorities implement protectionist policies and facilitate industrial land developers while property developers can offer solutions for specialized automobile manufacturing complexes.

Northern region – a strong base 

Automobile sales in Vietnam’s southern region account for 43.16% of the country’s total automobile sales per year, but the assembling cluster is mainly located in the North with a network of foreign original equipment manufacturers (OEMs) and auto part manufacturing facilities. 

The establishment of VinFast factories in 2017 has strengthened the automobile assembling and manufacturing platforms in the north. 

Accordingly, with a strong base and rich history of car assembling and auto part production, the demand for large industrial land banks for manufacturing factories is worth considering in the northern region. 

The central region is another destination with the presence of THACO’s Chu Lai-Truong Hai Automobile Complex. Chu Lai is a fully integrated automobile complex including factories for assembling, manufacturing and suppliers.

Southern region records land lease transactions 

Over the past three years, many successful industrial land rent transactions have been recorded in the southern region and most of them belong to accessory factories with a demand to expand production. 

The notable deals included a land area of 70,000 sq.m leased for tire manufacturing factory by European Camoplast Solideal, 55,000 sq.m for production facilities by European Schaeffler, 78,000 sq.m for automobile cable production plant by Japanese Yazaki.