Logistics poised to be a promising sector in VietnamJune 11, 2018 / By
The industrial property market in Vietnam, including industrial land, ready-built factories, warehouses and other logistics properties, is in the nascent stages of development and is strongly featured by the following:
- Industrial parks and other industrial properties that are competing with each other mainly on location, rather than on standards of infrastructure, buildings and services.
- Industrial parks and other industrial properties are mostly sparse and major industries are not gathered for development on a regional basis.
- Major occupiers predominantly from labour-intensive industries, including textiles and wearing apparel, food products, wood products and furniture, and rubber and plastics products.
Given the country’s improving market fundamentals, Vietnam stands a good chance of winning market share as its regional peers shift towards more mature industrial development. There are several notable advantages that make Vietnam an attractive destination for industrial development:
- Strategic location
Vietnam’s advantageous geographical location with access to the world’s major seaborne trade routes, has offered the country huge opportuniies to develop maritime transport particularly for logistics services. In addition, the country’s close proximity to China makes it a worthy option for manufacturers looking at alternative locations in the South East Asia region.
- Strong economic growth
The key drivers of Vietnam’s economic growth can be attributed to urbanisation; foreign direct investment; growth in the manufacturing sector; and growth in the middle-income population. These factors have created a spillover effect, driving the country’s demand for international transport and logistics services.
- Thriving middle-class and favourable demography
As the domestic economy moves from agriculture to manufacturing and services, household income is likely to increase. According to the Brookings Institute, Vietnam is expected to enjoy the strongest growth in the middle-income population bracket, with a 19% CAGR from 2018-2020, and an increase of 14% from the previous decade. The Vietnam General Statistics Office shows that the average working age in Vietnam ranges from 20 to 50 with a median age of around 30 in 2016. A young population coupled with growth in average income will support purchasing power and help the country remain an attractive destination for both local and foreign investors.
- Low cost
Vietnam has become more attractive to foreign manufacturers, their associated suppliers and supporting industries thanks to its existing variety of tax incentives and low labour costs. This in turn will allow further potential growth in the industrial sector generally and logistics services in particular.
In comparison to its regional peers, the Vietnam market is still comparatively immature. However, as Vietnam steadily approaches the growth stage of its industrial market evolution, specific areas of opportunity are beginning to emerge as it develops an intermediate product and value-added offering. Moving from more labour-intensive to more capital-intensive and automated resources, JLL anticipates that the typology of the industrial offering will steadily become more sophisticated as occupier requirements develop and industrial market demand moves from its current low specifications to higher specifications needs.
A significant area of land is planned for industrial development until 2020, nearly double the current market size. Thus, huge opportunities exist in Vietnam for both existing players and potential new market entrants to access potential land banks and capture market share.
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