Overall approach needed for industrial real estate development

Statistics released from the Ministry of Planning and Investment (MPI) show that the country had established a total of 326 industrial parks (IPs) by the end of 2018, covering roughly 93,000 ha. Meanwhile the occupancy rate of local operating IPs has reached 73 per cent.

These figures imply that industrial property is a lucrative market.

Most notably, the sector has recently received increasing interest from foreign investors since trade tensions between the United States and China broke out. Indeed, there has been an expected shift of global investment flows into Asian countries, including Vietnam.

In addition to this, Vietnam’s newly issued policies for industrial real estate, an industrial restructuring strategy, a new legal framework on managing IPs, industrial clusters, and economic zones, have opened up new opportunities for investors and the industrial property sector as a whole.

Nguyen Dinh Cung, director of the Central Institute for Economic Management (CIEM), noted that industrial structures are being transformed towards high value-added manufacturing industries along with the increasing participation in Industry 4.0 – based global value chains. The total land area for industrial development is set to double by 2020, as reported in a master development plan.

“Green manufacturing” industries with the optimal use of an efficient workforce and up to date technologies will grow into a trend for new-generation industrial property tenants that want to meet the increasing demand for high quality products.

These elements are triggering fresh requirements and higher technical standards for the future development of industrial real estate, Cung stressed.

Tran Quoc Trung, deputy head of the MPI’s Economic Zone Management Department, said that IPs are facing a number of limitations. Trung elaborated that many IPs have yet to meet the standards and requirements needed for environmental protection. Moreover, housing and social welfare for IP workers is yet to make considerable progress.

He added that the development plan for human resources still has a long way to match the investment inflows and practical demands of manufacturers. This coincides with a standstill in the mobilization of investment capital for developing IP infrastructure.

Vietnam has been implementing a range of new policies aimed for industrial park development. These include a number of investment incentives with regards to corporate income tax, import tax, land lease, and state support to infrastructure investment, the official said.