More foreign investors land in Vietnam's industrial parks

Vietnam’s industrial property market has seen a new wave of investment from major companies from Germany, Denmark, or Asian countries.

Vietnam's industrial property market is attracting investors around the world. Photo: The Hanoi Times

In late March, Fuchs Group, a global lubricant supplier from Germany, announced its intention to expand its presence in Vietnam by renting a land plot of over 20,000 square meters at the Phu My 3 Specialized Industrial Park (PM3 SIP) at Ba Ria – Vung Tau, to build a new manufacturing plant.

With a leasing contract of up to 55 years, Fuchs has shown its strong commitments in the country.

A representative of the PM3 SIP said Fuchs Group is the second European company at the industrial park, which opens up opportunities to further attract investors from the region.

In February, Framas Group, another German company that specializes in the manufacturing of injection molding machines, signed a contract to lease a ready-built factory area of 20,000 square meters from KTG Industrial Nhon Trach 2, Dong Nai Province, in a 10-year contract.

Australia-based LOGOS, a logistics real estate operator, on February 17 inked a deal with Manulife Investment Management on setting up a joint venture to acquire a built-to-suit in an area of 116,000 meters and investment capital of $80 million.

In another move, CapitalLand Development signed a memorandum of understanding (MoU) of $1 billion with Bac Giang Province to invest in one of the first urban-industrial-logistics projects in Vietnam and BW Industrial Development acquired the DEEP C Industrial Park with the size of 74,000 square meters at Bac Tien Phong Industrial Park, Quang Ninh Province.

During the first two months of 2022, Thai Nguyen Province attracted around $924 million in FDI, or 18.5% of the nationwide total investment capital so far. This included an injection of $920 million from Samsung Electro-Mechanics Vietnam, taking the total investment capital of the multinational manufacturer at the Yen Binh Industrial Park to $2.27 billion.

Overall in the January-March period, Denmark-based LEGO was the largest investor in the southern Binh Duong Province with an investment capital of $1.3 billion, accounting for 78.9% of the total FDI commitment. This is LEGO’s sixth plant in the world, and second in Asia.

The attraction of Vietnam’s industrial property market continues its strong momentum in the second quarter, with HuaLi Group (Taiwan) signing an agreement with investors at the WHA Industrial Zone 1 (WHA1) and Hoang Mai Industrial Park, Nghe An Province. The Taiwanese company plans to build a footwear factory for export, whose construction is scheduled to start in June and its completion in March 2023.

Once becoming operational, the plant would produce 25 million pairs of shoes per year and create jobs for 16,000 locals.

In WHA1 – Nghe An, Huali Group expects to build a factory of 7.3 hectares with an investment capital of $38 million The construction would kick off in August and be completed in June 2023. It is expected to produce 13 million pairs of shoes per year and employs 8,000 workers.

Promising future

The growing demand for industrial properties in Vietnam has lifted rental fees.

A real estate market report from the JLL in the first quarter noted the fee continued to expand by 8.5% year-on-year during the period, thanks to positive FDI inflows after the resumption of international flights.

The average renting fee for industrial parks currently stood at $120 per square meter.

JLL expected the market for ready-built factories would further grow due to the strong demand, especially from foreign investors that are looking to extend their businesses in Vietnam quickly.

Sharing the same view, Savills Vietnam said the country is attracting international industrial property developers and predicted an influx of a large number of projects in 2022.

In addition to infrastructure development, there has also been a growing trend of investment capital into logistics activities.

John Campbell, Head of Industrial Services at Savills Vietnam, said the recovery of domestic demand and inflows of FDI would contribute significantly to Vietnam’s economic prospects in 2022.

Meanwhile, there have been notable improvements in business conditions over the past five months after the fourth Covid-19 outbreak in the country, he said.

Campbell expected the reopening of the borders, active support from the Government for investors, and the resilience of domestic firms would open up a promising future for the local industrial property market in 2022 and the subsequent years.