Renting factory in industrial zones in Ho Chi Minh gets more interests

Renting factory in industrial zones seems to get more interests from investors.

According to a forecast by CBRE Research and Consulting, by the end of 2020, the total area of ready-built factories and warehouses in the North will reach 2 million m2, an increase of more than 25% over 2019. Whereas, total area of ready-built factories in the South will be at 2.7 million m2, increased 28% compared to 2019. After the COVID-19 epidemic, the average warehouse rent is about to rise from 4% to 11% over the same period last year.

More and more pre-built workshops/factories are available for rent. So far, many developers have built ready-built factories or workshops to maximize land use efficiency and to serve market demand.

According to CBRE, renting ready-built factories or workshops in industrial zones seems a new trend emerging recently. In particular, both supply and demand tend to increase in Ho Chi Minh and industrial cities such as Binh Duong, Dong Nai and Long An province.

Why the demand for renting factories in industrial parks tends to increase

It can be said that according to recent status, the trend of shifting FDI flows and diversifying supply chains towards "China + 1" happening, but it does not seem to be as fast as we expected.

Partly because China adjusted its retention policies and regained investor confidence. However, Vietnam is still the top ideal destination for foreign investors. The main reason is because they want to benefit from the trade agreements that Vietnam has signed. Moreover, because Vietnam is close to China, the world's No. 1 consumption market.

However, I realize that a lot of investors tend to make research of investment opportunities in Ho Chi Minh City for the first time. Then, investors come to localities near Ho Chi Minh including Binh Duong, Dong Nai, Long An and last choices are further provinces from Ho Chi Minh City.

Investors with large-scale investment will often consider leasing land for by-themselves construction. While many investors choose to rent a workshop because of temporary need of market or market entrance. However, they have in common that they will all consider 2 criteria:

+ Near sea port and main traffic routes

+ High-skilled labor force

Investors would rather choose Ho Chi Minh City due to satisfying above two conditions, followings are Dong Nai, Binh Duong, Long An and Binh Phuoc province.

However, Ho Chi Minh City is in shortage of land for lease. Therefore, in case investor is really pursuing projects in Ho Chi Minh with a small to medium scale for short or medium term, it may be feasible to rent ready-built factory. If you need a large or very large scale of investment, leasing land in industrial parks shall be recommended as good solution.

In brief, renting ready-built factory or workshop in industrial zone is considered inevitable, which will get strong development in Ho Chi Minh City and major industrial provinces. Meanwhile, the further the localities are away from Ho Chi Minh, less interested in factory investors will be.

A solution that harmonizes benefits for all enterprises including domestic small and medium enterprises and FDIs

In the writer's opinion, maybe we have paid pretty much attention to attracting FDI but forgot the great demand of domestic enterprises. The noted characteristics of domestic enterprises is that 90% of them are small and medium sized.

The capital scale cannot be compared with FDI enterprises, but they play significant role in running economy. In fact, there are still many enterprises with the same size as FDI enterprise 's, so their demand for investment and production expansion is also much remarkable.

Domestic small and medium-sized enterprises are also the backbone of industrial production including processing, manufacturing and supporting industries. However, their access to land for lease in the industrial zones seems limited due to many reasons. In fact, the feasible solution for them if interested is to rent a factory in the industrial park.

In brief, small enterprises still have their owned opportunities for investment in Ho Chi Minh City through renting factories in industrial zones.

Although the area is small, the investment incentives for project still ensure harmony. It is quite subjective an opinion from author, but the author hopes that it may be a possible solution. It is necessary in the context that many enterprises in Ho Chi Minh and other provinces are thinking about how to expand or shift production plants in the future.

Author: Sai Gon VRG - Marketing and Investment Dept.