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Auto sector growth affecting industrial real estate

Released at: 13:55, 25/12/2018

Auto sector growth affecting industrial real estate

Photo: Vinfast

Land banks increasing as local auto sector struggles to develop, according to CBRE.

by Doanh Doanh

While Vietnam’s automobile industry remains underdeveloped in terms of production and manufacturing compared to other ASEAN countries, the accumulation of industrial land banks for the industry is increasing, according to the latest report from CBRE on the impact of growth in the automobile sector on the industrial real estate market.

Each region in Vietnam has distinct competitive advantages based on differences in the nature of business and production as well as land availability.

The southern region accounts for 43.16 per cent of all automobile sales in Vietnam every year, but production scale and capacity in the region (including Ho Chi Minh City and Dong Nai, Binh Duong and Long An provinces) are much smaller than in other regions.

Assembly is mainly concentrated in the north, with a network of foreign original equipment manufacturers (OEMs) as well as component manufacturers.

The establishment of VinFast’s plants has strengthened the automobile assembly and manufacturing platforms in the north. With a strong base and rich history of car assembly and components production, the demand for large industrial land banks for factories in the northern region needs to be considered.

The central region, on the other hand, is the least developed area in this industry. Da Nang city and Quang Nam province are areas where the density of automobile manufacturers is relatively high, especially with the presence of the Chu Lai - Truong Hai Automobile Complex, developed by THACO. Chu Lai is a fully-integrated automobile complex including factories for manufacturing and assembly, warehousing, and a dedicated deep-sea port.

Over the past three years, many successful industrial land rental transactions have been conducted in the southern region and most belong to accessory factories with demand to expand production.

Since the beginning of 2017, Vietnam’s automobile market has witnessed a series of significant events that are expected to reshape the entire industry. The most important were the promulgation of Decree No. 116/2017/ND-CP and Decree No. 125/2017/ND-CP in October and November 2017. These policies were designed to support emerging motor vehicle manufacturing interests in Vietnam by applying legal critera to expand production scale and improve the quality of domestic products.

The country’s automobile industry still has much to do to reach a “golden period” and compete with regional rivals. The role of policy makers is considered the most vital, but the industry needs more than that to thrive. A win-win relationship can be established for both government and real estate developers.

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