Navigating challenges in Vietnam's industrial real estate market
Vietnam's industrial real estate market boasts ample potential, but challenges remain to its development.
Dinh Hoai Nam, director and head of business development at SLP Vietnam, said, “Over the past four years, we have experienced rather efficient project implementation in key northern localities. Still, there are some small obstacles related to investment and licensing. Some provinces request us to clarify whether SLP is an industrial real estate company or a logistics service provider. It indicates that there is no clear definition for businesses in our industry, which leads to a lack of proper policies like land, tax, and credit incentives. Vietnam needs to issue more appropriate policies for the industry.”
In addition, it is vital to build a synchronous infrastructure system. SLP hopes the government will accelerate this process to improve connectivity, Nam added.
According to Nam, there's a scarcity of land in tier-1 markets surrounding Hanoi, Hung Yen, Bac Giang, Bac Ninh, Dong Nai, Binh Duong, and Long An. Hence, they are switching their focus to the tier-2 and tier-3 markets. To lure industrial property developers, localities should prepare infrastructure, coupled with attractive policies and investment promotions. SLP is researching the expansion of its land funds to tier-2 markets and beyond.
Regarding these challenges, Edwin Chee, COO of SLP Vietnam, said, “The industrial property market is facing key challenges in 2024. First, profitability is expected to decline due to high financing costs, which are driving up the capitalisation rates for properties. Second, there is fierce price competition from neighbouring countries like Thailand, where industrial land rental prices are often lower. Additionally, high logistics, construction, and labour costs in Vietnam pose significant hurdles.”
“Despite these challenges, there is optimism for long-term growth due to Vietnam's strong economic fundamentals and substantial foreign direct investment,” he emphasised.
SLP has expanded its portfolio aggressively in the country, comprising 11 projects with a total construction area of about one million square metres. The company is ready to exploit about 470,000 sq.m. SLP is also accelerating project expansion and construction in Bac Ninh, Dong Nai, and Hung Yen, which will be announced in 2025.
