Vietnam stands out as Southeast Asia’s most promising market for industrial real estate investment, according to major investors in the sector speaking at the Mingtiandi Singapore Forum 2024 on Tuesday. Watch the full recording>>
At the event, which was sponsored by Yardi, Gene King of BW Industrial, one of Vietnam’s top developers in the sector, pointed to robust economic growth, favourable demographics and a pro-business climate as powering the potential of mainland Southeast Asia’s most populous nation.
“I think there are three key pillars,” said King, the chief investment officer of BW, which has more than 9 million square metres (96.9 million square feet) of industrial land across 51 projects in the country. “One, of course, is the diversification into Vietnam. The second is connected: it’s the manufacturing-led logistics. The third thing is that domestic consumption is rebounding. So I think the growing middle class in Vietnam is very, very impressive.”
King was on stage together with panellists from pension fund manager Ivanhoe Cambridge, industrial specialist ESR and data provider MSCI at the all-day event to discuss how growing demand for logistics, biomedical and tech space has provided a chance for investors and developers to build high-yielding platforms and portfolios.
Foreign Investment Surge
Lynette Ng, a senior associate in Asia real assets research at MSCI, observed that annual investment in industrial real estate across Southeast Asia has risen from half a billion dollars annually a decade ago to nearly $2 billion today.
“We have seen a lot more institutional investment in recent years,” Ng told the audience of investment professionals. “First of all, over the past five years, there’s been a lot more foreign capital coming into the industrial, logistics and even the data centre space. Prior to that, we were mostly seeing your private players, your local corporates, investing into these assets or buying up these assets.”
Speakers on the Southeast Asia industrial panel at Mingtiandi’s Singapore Forum
The recent surge in foreign investor interest was driven in no small part by the rise of digital infrastructure, according to the MSCI analyst, as e-commerce, streaming services and AI applications have fuelled a data centre boom.
“Up until 2021, if we look at the sectoral splits for the industrial sector, I would say maybe about 75 percent of investment into industrial in this region has gone into manufacturing, warehousing, logistics,” Ng said. “Over the past two to three years, data centres have taken up to half that amount. And I think in 2024, we’re going to see that data centres might even outweigh this figure.”
Thailand Cooking
ESR Southeast Asia head Jai Mirpuri, whose company acquired a stake in BW last year, sees Thailand’s long history of foreign investment providing opportunities not available in Southeast Asia’s later-developing markets. Hong Kong-listed ESR entered the Thai market in 2023 and has since built and leased a few hundred thousand square metres of space.
“Thailand, of the various Southeast Asian economies, has much more depth,” Mirpuri said. “Thailand had a wave of industrialisation back in the 1980s with a lot of Japanese companies setting up operations in Thailand. That depth is visible when you actually visit Thailand, in terms of the banking sector, the insurance sector, the real estate sector, the kind of general contractors that are there.”
Mirpuri also hailed Thailand’s “extremely mature” incentive schemes and extensive pool of engineering talent as attractive for companies looking to set up high-tech manufacturing.
“So we’ve actually heard customers tell us that we picked Thailand because we feel comfortable with the ease of doing business and the way this whole structure has been set up and has been for a long time,” he said.
Scaling-Up Challenge
Ivanhoe Cambridge’s pan-Asia Pacific industrial footprint includes joint ventures in Southeast Asia, China and India alongside ESR’s Logos subsidiary.
The real estate division of Canadian pension fund CDPQ likes India because it offers a combination of economic growth and scale, said Josephine Yip, vice president for APAC investments and asset management at Ivanhoe Cambridge. The world’s most populous country suits Ivanhoe’s style of direct investment, as opposed to indirect investment via funds.
“I think at this point in time, the Southeast Asian markets are a little bit small in terms of scale for us to access it directly, unless we find an opportunity that allows us to deploy in a significant way,” Yip said.
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