The Challenges of Investing in Industrial Real Estate
Investing in industrial real estate in Vietnam’s industrial zones (IZs) is not a simple task, as it requires significant capital and patience. However, many businesses that are not specialized in the real estate market have expanded their operations into this sector. With the country’s growing economy and the influx of foreign investment, there is a growing demand for industrial properties, making it an attractive investment opportunity.
Embracing the Trend of Foreign Investment
One such company that has ventured into industrial real estate is Gilimex, a textile and garment manufacturing company with over 40 years of experience. Since 2019, Gilimex has invested in the development of IZs and has successfully operated and generated revenue from projects in Thua Thien – Hue province. They have also begun the implementation of the Gilimex Vinh Long IZ, covering an area of 400 hectares.
According to Vu Thi Thu Hang, the Business Director of Gilimex Industrial Zone Company, industrial real estate development is essential for the country’s economy. This investment segment has become increasingly attractive as Vietnam is poised to capitalize on the wave of foreign investment in high-tech industries. As a result, many organizations are focusing their capital on investing in industrial properties in IZs.
Le Anh Dung, the CEO of A+ Industrial Real Estate Investment and Leasing Joint Stock Company, notes that investing in an IZ project takes 12 to 15 years to recover the initial capital. Therefore, it is crucial for businesses to carefully plan and build the necessary infrastructure for long-term success, as rushing into leasing industrial properties prematurely may lead to unfavorable outcomes.
The Importance of Industry Linkages
When investing in IZs, it is essential to consider the anchor tenants – major multinational corporations that attract other suppliers and form a production chain. For instance, IZs in the northern provinces benefit greatly from the presence of multinational companies like Samsung and LG, which subsequently attract vendors and create a network of manufacturing facilities. This industry linkages play a crucial role in the success of an IZ project.
Additionally, businesses need to understand that investing in industrial real estate in IZs today differs significantly from the past, when the focus was primarily on serving manufacturing needs. The current standards for IZ investments are much higher, encompassing not only land, infrastructure, environmental protection, and social welfare but also cultural aspects and sustainable development. Therefore, businesses should thoroughly study the market demands and avoid speculative investments that may lead to an oversupply of industrial properties.
Clear Differentiation for Sustainable Development
To ensure the sustainable development of IZs, it is essential to differentiate between IZs for different industries. Simply pursuing profit without considering the compatibility of industries can lead to various consequences. Investors must recognize that “green” IZs go beyond tree planting and include intelligent ecosystems that promote symbiotic relationships. This could involve clustering businesses within the same industry, such as electronics, automobiles, or renewable energy, to foster sustainable and collaborative growth.
Investing in industrial real estate in Vietnam’s IZs can yield significant returns, but it also presents challenges that require careful consideration. Businesses must have substantial financial resources and a long-term perspective to navigate the complex process of obtaining permits, land clearance, building infrastructure, and attracting tenants. By understanding industry linkages and embracing sustainable development, investors can maximize their chances of success in this promising sector of the economy.