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Vietnam Today

JLL: Vietnam to benefit from industrial investor dollars

Released at: 07:04, 26/05/2018

JLL: Vietnam to benefit from industrial investor dollars

Photo: Viet Tuan (VET)

Vietnam among developing markets piquing investor interest, according to JLL Vietnam.

by Hong Nhung

A number of developing markets are emerging to pique investor interest, according to JLL Vietnam, and at the top of the list is booming Southeast Asia, where markets like Vietnam and Indonesia stand to benefit from expanded mandates.

“We are seeing an increasing number of companies looking to relocate out of China due to higher labor costs and a challenging business environment, and Vietnam is looking to take advantage of the current market conditions and is making a big push to establish itself as the next manufacturing hub for Southeast Asia,” said Mr. Stephen Wyatt, Country Head of JLL Vietnam.

A number of key factors are helping attract companies, he added, including lower labor costs, economic zones (EZs) offering tax incentives, the signing of free trade agreements (FTAs), including with the EU and South Korea, and, most recently, agreement over the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Challenges remain, with a lack of good quality infrastructure and unnecessary bureaucratic red tape, but JLL believes there is considerable upside in the industrial and logistics sectors in the coming years and expects to see continued strong demand from investors, developers, and manufacturers.

Japan and Australia remain the key core markets for logistics property in Asia-Pacific, while China - though not as transparent - has matured rapidly and boasts a substantial stock of modern assets. But developers and investors active in these key markets are now seeking growth elsewhere in the region.

The US-based private equity firm Warburg Pincus recently formed a joint venture with Becamex IDC Corp. to develop institutional-grade industrial and logistics properties across Vietnam.

“The shift of manufacturing bases away from markets like China, coupled with the rapid rise of domestic consumption, means that Vietnam’s industrial real estate market is in ‘the early innings’ and at an inflection point for outsized growth,” said Mr. Jeffrey Perlman, Head of Southeast Asia at Warburg Pincus.

Investors like Warburg Pincus are heading to developing logistics markets because of the yield arbitrage and maturing local economies, according to Mr. Michael Fenton, JLL’s Head of Industrial in Australia. Yields in Japan sit at around 4 per cent for prime stock and just over 5 per cent in Australia, he explained, while in the region’s developing markets of India, Indonesia and Vietnam, modern logistics facilities leased to international third-party logistics companies yield 7 to 9 per cent.

Large logistics developers are expanding their operations in developing economies in response to these shifting demographics and evolving retail.

Mr. Trent Iliffe, Joint Managing Director of LOGOS Property, said that India, Indonesia and Vietnam have large populations and growing middle classes, which allow operators the scale to build a business and investors more liquidity. Future markets for LOGOS are likely to be the Philippines, Thailand and Vietnam, partially driven by their large population, as it supports its customers’ growth strategies, he said.

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