VN Industrial & Logistics: Resilient during uncertainties

According to a JLL report, Vietnam has developed a tri-economic regional model to stimulate vertical growth across the country. In 2Q21, the total area of industrial land and ready-built factories in the North was 9,700 ha and 1.9 million sqm respectively, while that in the central region was 6,600 ha and 30,500 sqm; and in South, it was 25,200 ha and 3.2 million sqm. 

Moreover, 2Q21 was also a playground for mergers and acquisitions. One of the most notable deals was Boustead acquiring a 49% stake in KTG Bac Ninh Industrial Development JSC in Yen Phong IP for about $6.9 million. The market also welcomed new investors such as GNP Industrial or KCN Vietnam, which can be seen as signs of great market potential even during the pandemic.

“The attractiveness of the logistics and industrial asset class will only intensify for investors, as many of them are starting to increase their exposure to logistics assets while they look to allocate capital into stable income-producing assets,” Trang added.

However, the spread of COVID-19 has also affected the supply chain and operations in the manufacturing industry. Factories faced labor shortages due to restrictions on movement. Logistics connections suffered from disruption in product delivery as goods were classified into essential and non-essential. The logistics system, supply chain, distribution channels, and retail channels are under pressure to meet social security policies while ensuring efficient services operations.

FMCG, e-commerce, pharmaceuticals, and cold storage are a few sectors that will have a high demand for additional warehouse space near urban areas. On the other hand, automobiles, heavy machinery, and chemical industries may look for short-term rent in suburban areas.

Prices of many construction materials have increased by 25% from early 2021, especially the steel price. These skyrocketing prices have affected budgets and delayed progress, forcing investors and contractors to recalculate if they wish to continue the project. The effects would reduce the supply of industrial real estate, factories, and warehouses in the short term, directly affecting the rental rate, which is likely to reach a new height.

“The scarcity of steel and its constantly fluctuating price in recent times is due to the imbalance between demand and supply. The demand by some countries increased sharply after the first wave of the pandemic. Especially the US market’s high purchase reflected the biggest-ever difference between the US and ASEAN market’s steel price. Another important reason is that China—one of the global key suppliers of crude steel, cut its production and export output to reduce the negative impact of emissions on the environment,” says Nguyen Cao Tri, President - NS BlueScope Lysaght Vietnam.