India, Vietnam Logistics Markets Get ‘China Plus One’ Boost: MTD TV

 
Manufacturers are rapidly adopting a “China Plus One” strategy to diversify manufacturing locations and reduce supply chain risks, with this trend providing a major boost for the industrial real estate markets in India and Vietnam, according to executives from BW Industrial, CPP Investments and Frasers Property Vietnam.

Speaking in the final session of Mingtiandi’s Asia Logistics Forum for this year, Fion Ng, chief operating officer of ESR-backed BW Industrial said that while Vietnam has been attracting manufacturers from Japan, Korea and Taiwan over the past decade, that trend is accelerating as it becomes a top alternative for companies diversifying their supply chains.

“We have definitely seen how this trend has gained increasing traction over the last five years or so and we at BW observed this momentum firsthand as we grew very rapidly in Vietnam from our inception in 2018,” Ng said. “This trend was hampered over the last two years due to COVID-19, but over the last two months, we have seen a surge in our leasing inquiries that have returned to pre-COVID levels.”

India has also been attracting global manufacturers to set up shop on the subcontinent as the government ramps up its infrastructure program and rolls out fiscal incentives, according to Hari Krishna V, a managing director with the real estate division of CPP Investments, who also joined the hour-long panel discussion sponsored by Yardi.

Leasing Picks Up

“We do believe that deglobalization is certainly benefiting countries… and within India, we’ve seen an acceleration of demand across different sectors – it’s been across EVs, electronics, manufacturing, auto sector, fast-moving consumer durables, all of these,” Krishna said. “This has been further enhanced by the government providing fairly significant financial incentives to manufacturers to move to India.”

Krishna added that authorities are also working to “debottleneck India on a significant scale” through road development programs to improve connectivity and alleviate traffic conditions, especially in major cities like Mumbai and Delhi.

Chong Chee Keong, general manager for industrial at Frasers Property Vietnam said in the same panel that the “queen bees” of the manufacturing sector, like Taiwan’s Foxconn and Korea’s Samsung, will likely continue to diversify their operations beyond China to mitigate risks, which is good news for Vietnam.

“We see a lot of challenges in China, even the industrial hub of Shenzhen, they are facing a lot of energy restrictions and they are facing a lot of physical labor issues – I would not say they would diversify or relocate the whole production from China to Vietnam – but they’re able to diversify some of their production into the market,” Chong said.

He added that this diversification is accelerating this year as Frasers Property Vietnam has seen an upswing in customer inquiries over the past three months.

BW Industrial’s Ng said the ESR-backed firm is set to leverage the leasing rebound with its launch of six to eight new projects this year in the Greater Hanoi region as well as in the Ho Chi Minh City area.

“Over the last two months, we have seen a very, very healthy pickup in leasing inquiries particularly from the Chinese and the Taiwanese investors,” she said. ”North Vietnam in particular has the geographical advantage of being in close proximity to the industrial South China cluster, where there is a very established electronics ecosystem.”

E-commerce Spurs Growth

While both countries are benefiting from shifts in manufacturing site selection, their growing consumer markets and burgeoning e-commerce sectors are also driving warehousing demand.

Chong said Vietnam has a huge market for fast-moving consumer goods and online shopping, with Southeast Asia online shopping giant Lazada expanding its last-mile logistics footprint in around Hanoi to complement its existing presence around Ho Chi Minh City.

“E-commerce has definitely been a key driver for logistic space in Vietnam,” echoed Ng, noting that the country has among the fastest growing e-commerce markets in Southeast Asia.

Rents for modern warehouses in northern Vietnam rose 8.2 percent last year at the same time that more than 700,000 square metres of new space entered the market. In the south, where the sector is more developed, rents inched up by 1.2 percent as 1.7 million square metres of new warehouses were launched.

In India, Krishna said the country’s e-commerce market has grown at a compounded annual growth rate of 42 percent over the past decade which has helped push demand for warehouse space.

Onward to Hong Kong

The emerging markets panel was the final session of the Mingtiandi Asia Logistics Forum 2023, with the company’s next event set for Hong Kong on 27 June.

More than 250 industry professionals are expected to attend the one-day Hong Kong forum at the Sheraton Hotel and Towers in Tsim Sha Tsui with speakers including PAG chairman and CEO Weijian Shan, Link REIT chief executive George Hongchoy and Don Taylor, director of office for Swire Properties.

More information on the Hong Kong forum is available here.