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Vietnam emerges as popular production hub

By Charlene Chin

/ EdgeProp Singapore |

July 16, 2020 12:29 PM SGT

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Vietnam is an up-and-coming production hub as trade disputes and Covid-19 push manufacturers to seek alternatives, CBRE research highlights in its report on international trade.

The country has continued to set new export records, increasing by an average of 16.8% a year between 2010 and 2019. Last year, Vietnam’s trade surplus totalled US$9.9 billion ($13.8 billion).

Vietnam’s industrial property market has reaped benefits from the US-China trade conflict, says CBRE. Average asking rents for industrial land in Vietnam increased by as much as 10%, with some industrial parks reporting rent growth of up to 40% y-o-y.

So long as trade with developed countries remains a key growth driver, CBRE believes that Vietnam’s manufacturing industry and industrial real estate market stand to benefit from rapid changes in global trade and supply chains.

As the global economy becomes less integrated due to Covid-19, the real estate consultancy expects that this is likely to result in the relocation of manufacturing hubs closer to target markets, and to those with more cost-effective and available labour pools.

“As a result of the pandemic, companies with an overdependence on one country or region may reassess their sourcing and manufacturing strategies,” it notes.

“Countries that are already investing in new infrastructure and are more open to attracting industry likely will receive the lion’s share of relocations,” says Desmond Sim, head of research, Singapore and Southeast Asia, at CBRE. “We have seen some manufacturers moving away from centralised supply towards increased diversification.”

Besides this, CBRE forecasts that e-commerce growth will change demand for warehouses in Asia Pacific. Total cross-border e-commerce sales in the region are expected to more than double to US$389.5 billion in 2023, from US$181.4 billion in 2018.

“The integration of local supply chains likely will blend industrial and retail real estate, affecting the way goods are warehoused and delivered to consumers,” it says.

In particular, “bonded warehouses, which enable storage of goods without payment of duty, are increasingly popular amid rising consumer demand for imported products, as they facilitate faster delivery than direct shipping from the country of origin,” it adds.

CBRE therefore expects an increase in leasing demand for these warehouses, especially in large consumer markets such as China and India, and in cities with major ports and airports, like Hangzhou, Shenzhen, Shanghai, Mumbai and Chennai.

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