Industrial Segment and M&A Transactions Over The Last 9 Months of 2020

The first nine months has also seen some key M&A deals, and the emergence of distressed assets and facilities for sale & leaseback. Regarding leasing, strong demand exists for ready builds as suppliers are more conservative to make long-term land lease commitments, or are relying on short term contracts with their customers

Mr. John Campbell, Manager, Industrial Services, Savills Vietnam stated “Despite the ongoing pandemic, we’ve witnessed a number of key M&A’s in Q3/2020. For example, Logos Property from Australia entered the market with their US$350 million logistics development joint venture. Asia’s largest warehouse developer GLP is planning to cooperate with Vietnam’s SEA Logistic Partners, or SLP, in a 1.5 billion USD new venture. Furthermore, South Korean firm Mirae Asset Daewoo Co. and Naver Corporation jointly invested $37 million in a warehouse in LogisValley logistics hub in Bac Ninh. Regarding manufacturing investments, Apple supplier and electronics giant, Pegatron from Taiwan, invested over US$19 million newly registered capital into Hai Phong for the first phase of their Vietnam expansion plans. Interestingly in Q3/2020, we witnessed Ha Nam receive the highest amount manufacturing and processing FDI, receiving over US$447 million, and followed by Hai Phong in second place with US$438 million. The largest manufacturing project in Ha Nam was a substantial US$273 million investment from Taiwan’s electronics player Wistron Corporation. It’s more important than ever that some of the world’s most renowned logistics developers and manufacturers are committing to Vietnam, demonstrating their belief in the country’s long-term potential despite the current difficulties posed by the pandemic.”

With demand continuing to outpace supply with IP occupancy reaching 76% nationally, there’s a clear need for more supply in the key industrial provinces. Occupancy rates in key hubs such as Binh Duong, Dong Nai, Long An in the South, and Bac Ninh, Hung Yen, and Hai Phong in the North, has risen significantly since 2018. With an expected influx on manufacturers moving out of China in 2021 and 2022, it’s vital for developers to bring more live projects to catch and accommodate high value manufacturing investments. For example, Dong Nai plans for eight additional industrial zones. Long Thanh district’s People Committee chairman Vo Tan Duc announced plans to build four new industrial zones in Long Thanh to meet said demand. Phuoc Binh commune will have two more industrial zones with the size up to 900 ha s and an area of about 500 ha. Tan Hiep and Binh An communes will also have another industrial park each. Furthermore, ‘rental’ developers such as BW Industrial Development JSC are racing to expand during this time, growing their initial supply from 130 ha in 2018 to almost 500 ha this year. Most lease transactions in H1/2020 derived from projects and ongoing discussions from last year, while many leases were also executed from companies already in Vietnam looking to expand production. The travel restrictions have limited new ‘market entry’ enquiries, postponing site inspections from key international investors, in turn reducing the number of executed leases with local developers- Mr. Campbell commented.

While there are no guarantees for next year, Vietnam’s industrial sector’s reliance on continued supply chain migration out of China is evident as many landlords are positioning themselves for a busy and fruitful year once these restrictions are lifted. On the back of improvements in manufacturing PMI and industrial production in September, the Savills expert hopes this manufacturing and production growth will continue should Vietnam maintain is low number of Covid-19 cases. The last quarter will likely see investors and occupiers alike trying to quickly finalize discussions and MOUs with developers to lock in favorable prices while landlords are still flexible to negotiate amid the pandemic. Should the flights be up and running by H1/2021, factory, warehouse, and land lease rates will likely increase, prompting investors to finalize rates as soon as possible.