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Industrial Real Estate Businesses Are Not Pieces Of Cake

Industrial real estate businesses are not pieces of cake

The picture of the Vietnamese industrial real estate market brightens up thanks to the shifting of investment capital from multinational corporations from the US, EU, and China into Vietnam. However, doing business in this sector is not that easy.

Industrial Real Estate

The flow of foreign investment capital

Industrial real estate is an important sector in the economy. Therefore, investment in this segment is becoming attractive as Vietnam is going to welcome waves of foreign investment into the high-tech sector. This has prompted many organizations to invest in industrial real estate.

Mr. Dao The Anh, Chairman of RSL Group, a business providing comprehensive investment promotion and consulting solutions for FDI and Vietnamese enterprises, stated that currently, many companies that are not specialized in the real estate market are moving into industrial real estate business. These companies are focusing on developing projects in the northern provinces and have a tendency to invest in the provinces adjacent to Ho Chi Minh City by the end of 2024.

According to Mr. The Anh, the advantage of these businesses is their strong financial resources and clear understanding of what a manufacturing plant must have. At the same time, the developers of these real estate projects are always looking to increase the occupancy rate by offering many customer services such as obtaining investment certificates to building permits, fire protection, and safety certifications, as well as providing good infrastructure and reasonable rental rates.

“There are currently 298 industrial parks nationwide that have been put into operation, with an occupancy rate of 72.5%. Therefore, the faster a company can implement industrial real estate infrastructure, the greater the opportunity for success,” said Mr. The Anh.

Investing in industrial real estate is not that easy

In fact, investing in an industrial park project requires businesses to have both a budget of several trillion dong and determination, as this is a long-term profitable channel. It is not to mention, obtaining permissions, land clearing, and attracting investors is a challenging process.

“The decision to establish a factory in an industrial park depends on multinational corporations—those are vital links at the beginning of the supply chain. This can be clearly seen in high occupancy rates in northern Vietnam industrial parks thanks to the presence of Samsung, LG, which are accompanied by their vendors (suppliers) and create chains of manufacturing plants,” said Ms. Vu Thi Thu Hang, Sales Director of Gilimex Industrial Park Joint Stock Company.

Mr. Le Anh Dung, General Director of A+ Industrial Real Estate Investment and Leasing Joint Stock Company, said capital recovery in an industrial real estate project takes up to 12-15 years. Therefore, infrastructure developers hastily rent out premises to quickly recover capital could lead to failure.

Many experts believe that companies looking to invest in the industrial real estate segment now face a different situation compared to when Vietnam just opened its door. 

In the past, developing industrial parks was mainly concerned with production, but now the standards for investing in industrial parks have increased significantly. It’s not only about land, infrastructure, environmental protection, and social welfare, but also cultural and sustainable development criteria. As such, companies need to thoroughly research the market, assess customer needs, and avoid the hasty investment in industrial real estate that could lead to a surplus crisis.

Source: Redsunland