With global production shifting away from China, Vietnam is ready to welcome more manufacturers from Europe thanks to the added benefits of the impending the EU-Vietnam Free Trade Agreement (EVFTA) which is set to come into force in early August.
According to the latest CBRE Vietnam's report regarding the future of the industrial real estate market, European companies will be able to rent factories in the country once the trade deal becomes effective.
Le Trong Hieu, Director, Advisory, and Head of Transaction Services of CBRE, said that the EVFTA will serve to greatly contribute to the nation’s overall economic picture whilst simultaneously creating motivation to fully recover from the economic impact of the novel coronavirus pandemic.
Most notably, recent achievements in epidemic prevention will help the country to continue welcoming waves of shifting production of manufacturing companies from China.
Hieu predicts that demand for industrial property rental from these companies will increase ahead in the near future, mainly because of industrial groups such as machinery & equipment, particularly auto parts and components, electronics, and apparel.
Moreover, the nation is currently the third largest country in ASEAN with a population of 96 million people, whilst its GDP per capita reached an average of US$3,500 in 2019, surpassing the US$3,000 standard of a person who can typically afford a car, according to the Nikkei Times.
The Vietnamese industrial property market is expected to run smoothly over the coming years as a result of limited supply, in terms of land, ready-built factories, and warehouses, in the context of rapidly growing demand from companies that operate in assembling, spare parts, and trading automobiles.
Despite these positive factors, according to CBRE, a provider of commercial real estate services, fresh opportunities also come with potential risks. Indeed, a sudden shift of production to the country will likely lead to bottlenecks caused as a result of the scarcity of the supply sources. Meanwhile, investors will also struggle to have sufficient time to market quality industrial products as it is typically time-consuming work, especially in terms of legal procedures.
Furthermore, the lack of temporary human resources and the limited infrastructure system that exists locally are set to be barriers to the nation’s growth prospects for the industrial property market over the short term.
When faced with these challenges, CBRE believes that investors who have available clean land funds should speed up the construction of workshops as a means of preparing for new expansion opportunities.
Furthermore, financiers who are newcomers or are interested in investing in this market must be proactive to seize upon these rare development opportunities. The Government should therefore put in place appropriate measures aimed at dealing with these shortcomings in order to ensure that domestic businesses are fully able to maximise the competitive advantages they enjoy from the EVFTA.