Industrial park developers are turning from long-term land leases toadded-value pre-fabricated factory construction for lease with areas ofabout 2,000-3,000 square metres, the Vietnam Investment Review (VIR)reported on March 4.
Jonathan Tizzard, national head of researchand valuation at Cushman & Wakefield, said a recent trend indicateddevelopers were turning from long-term leases to dividing the total landarea into plots and constructing factories, warehouses or storage forlease.
According to the Ho Chi Minh City Export Processing andIndustrial Zone Authority (HEPZA), in 2013, the total leased area ofwarehousing in the city’s industrial parks reached 55,680 square metres,representing a sharp increase of 37 percent year-on-year.
“This proved the demand for this type of industrial property is following an upward trend,” Tizzard claimed.
“Demandmainly comes from small and medium foreign invested enterprises (SMEs)support industries which reflected the local authorities’ success inattracting support industries,” he pointed out.
Kelvin Teo,co-chairman of VSIP Group and CEO of Sembcorp Development told VIR thatmanufacturers often weigh up different rental options.
“Short-termleases give manufacturers flexibility to first understand the country’soperating environment and customer demand before making more long-terminvestment decisions,” he said.
For VSIP, the company is offering ready-built factories (RBF) in VSIP Binh Duong and Hai Phong.
“From our experience, the RBF are popular with some foreign companies who are new to investing in Vietnam,” Teo said.
Thereason for this move, according to Tizzard, was that those newlyestablished companies investing in the Vietnam market firstly need tounderstand the country before settling down for the long term, andtherefore leased warehouses inside IPs over 2-3 years allow them topilot manufacturing instead of leasing industrial land for 50-yearperiods.
Another reason was to meet foreign investor demands for convenience.
“Inthe difficult economic context, leasing built factories is preferablefor new businesses that want to begin exploiting opportunities in theshortest time,” added Tizzard.
It is estimated that factoriestake at least four to five months to complete with construction costsranging from 170 USD to 400 USD per square metre depending on theirspecialism.
In contrast industrial warehousing can help enterprises save time and money otherwise wasted on building infrastructure.
Moreover,most IPs require upfront full payment for the whole leasing period(averaging 30 to 50 years). Leased factories by contrast can help smallforeign companies with limited initial equity to save money and minimiserisks.
Another advantage of this change is the rent achievablefor leasing land with built factories is still being kept relativelyhigh and stable over quarters despite the decreasing rent in othersegments in the market.
The asking rent averages from 2 USD to 6USD per square metre per month. Given the increasingly high demand ofSMEs entering Vietnam, especially those moving from China, this movewill help developers to attract tenants by providing them with moreflexibility in leasing choices, Tizzard said.
To support thischange, the Government has allowed investors who have been issuedinvestment certificates by December 31, 2012, to amend their businesspurposes in those certificates to include warehouse leasing activities.
Atthe same time, industrial park managers have been applying policies tosupport investment from foreign invested SMEs that will be the maindemand driver for built factory leasing by working with infrastructuredevelopment companies to build qualified warehouses and filtering outenterprises with poor performance to have more space for buildingfactories/warehouses for new investors.
IP management bodies arealso providing more services to support new enterprises in leasingfactories such as labour recruitment, investment consultancy, training,accounting and management consultancy.
There are currently 18operating IPs in Ho Chi Minh City providing more than 3,600 hectares.The leasable area is estimated to be about 62 percent of the totalindustrial land scale, or more than 2,200 hectares.
It ispredicted that the total increase in industrial land in Ho Chi Minh Cityup to 2020 will be approximately 3,000 hectares, a roughly 85 percentincrease from the fourth quarter of 2013. In terms of the number of IPs,it is forecast that the 18 current parks will expand and there will be12 new IPs in operation by 2020.
Meanwhile, nine IPs in Hanoiwith a total leasable area of approximately 1,400 hectares are currentlyin operation. Available land for lease in the fourth quarter of 2013accounted for roughly 34 percent of the 1,400 hectares, the same as theprevious quarter.-VNA
Jonathan Tizzard, national head of researchand valuation at Cushman & Wakefield, said a recent trend indicateddevelopers were turning from long-term leases to dividing the total landarea into plots and constructing factories, warehouses or storage forlease.
According to the Ho Chi Minh City Export Processing andIndustrial Zone Authority (HEPZA), in 2013, the total leased area ofwarehousing in the city’s industrial parks reached 55,680 square metres,representing a sharp increase of 37 percent year-on-year.
“This proved the demand for this type of industrial property is following an upward trend,” Tizzard claimed.
“Demandmainly comes from small and medium foreign invested enterprises (SMEs)support industries which reflected the local authorities’ success inattracting support industries,” he pointed out.
Kelvin Teo,co-chairman of VSIP Group and CEO of Sembcorp Development told VIR thatmanufacturers often weigh up different rental options.
“Short-termleases give manufacturers flexibility to first understand the country’soperating environment and customer demand before making more long-terminvestment decisions,” he said.
For VSIP, the company is offering ready-built factories (RBF) in VSIP Binh Duong and Hai Phong.
“From our experience, the RBF are popular with some foreign companies who are new to investing in Vietnam,” Teo said.
Thereason for this move, according to Tizzard, was that those newlyestablished companies investing in the Vietnam market firstly need tounderstand the country before settling down for the long term, andtherefore leased warehouses inside IPs over 2-3 years allow them topilot manufacturing instead of leasing industrial land for 50-yearperiods.
Another reason was to meet foreign investor demands for convenience.
“Inthe difficult economic context, leasing built factories is preferablefor new businesses that want to begin exploiting opportunities in theshortest time,” added Tizzard.
It is estimated that factoriestake at least four to five months to complete with construction costsranging from 170 USD to 400 USD per square metre depending on theirspecialism.
In contrast industrial warehousing can help enterprises save time and money otherwise wasted on building infrastructure.
Moreover,most IPs require upfront full payment for the whole leasing period(averaging 30 to 50 years). Leased factories by contrast can help smallforeign companies with limited initial equity to save money and minimiserisks.
Another advantage of this change is the rent achievablefor leasing land with built factories is still being kept relativelyhigh and stable over quarters despite the decreasing rent in othersegments in the market.
The asking rent averages from 2 USD to 6USD per square metre per month. Given the increasingly high demand ofSMEs entering Vietnam, especially those moving from China, this movewill help developers to attract tenants by providing them with moreflexibility in leasing choices, Tizzard said.
To support thischange, the Government has allowed investors who have been issuedinvestment certificates by December 31, 2012, to amend their businesspurposes in those certificates to include warehouse leasing activities.
Atthe same time, industrial park managers have been applying policies tosupport investment from foreign invested SMEs that will be the maindemand driver for built factory leasing by working with infrastructuredevelopment companies to build qualified warehouses and filtering outenterprises with poor performance to have more space for buildingfactories/warehouses for new investors.
IP management bodies arealso providing more services to support new enterprises in leasingfactories such as labour recruitment, investment consultancy, training,accounting and management consultancy.
There are currently 18operating IPs in Ho Chi Minh City providing more than 3,600 hectares.The leasable area is estimated to be about 62 percent of the totalindustrial land scale, or more than 2,200 hectares.
It ispredicted that the total increase in industrial land in Ho Chi Minh Cityup to 2020 will be approximately 3,000 hectares, a roughly 85 percentincrease from the fourth quarter of 2013. In terms of the number of IPs,it is forecast that the 18 current parks will expand and there will be12 new IPs in operation by 2020.
Meanwhile, nine IPs in Hanoiwith a total leasable area of approximately 1,400 hectares are currentlyin operation. Available land for lease in the fourth quarter of 2013accounted for roughly 34 percent of the 1,400 hectares, the same as theprevious quarter.-VNA
