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MTD TV Panel: Vietnam Logistics Real Estate Gains Favour With Investors in 2020

2020/07/28 by Jonathan Burgos Leave a Comment

https://player.vimeo.com/video/441959633?h=3d6fe14b8d

 
Warehouse properties in Vietnam have gained fresh appeal with investors across emerging markets in Asia, benefiting from an e-commerce boom and the ongoing diversification of global supply chains from China to other parts of Asia, industry experts said Tuesday in the third installment of Mingtiandi’s MTD TV online video series of Asia Pacific logistics opportunities.

Despite the Covid-19 outbreak tilting the global economy into recession, the investment climate in Vietnam hasn’t slowed down, said CK Tong, CEO of BW Industrial, a Warburg Pincus-backed industrial property developer in Vietnam. “We are seeing a lot of enquiries about manufacturing, mostly from overseas companies,” Tong said. “A lot of the local players are interested in expanding into distribution centres.”

Essensys - Verdantix research repot

The Mingtiandi panel brought together top executives from Baker McKenzie, BW Industrial, JLL and Logos Property in a discussion that outlined how the logistics markets across Asia’s emerging markets are evolving particularly as the Covid-19 pandemic accelerates the growth of e-commerce across the region.

In an online survey during the panel discussion, Vietnam was picked by 66 percent of the participants as the best logistics investment destination across emerging Asia, followed by Indonesia with 25 percent and India with 8 percent.

Regional Shifts Pull Investors into Vietnam

“Vietnam is an extremely attractive market,” said Peter Garrison, head of strategic customers at ARA Asset Management-backed Logos Property. “There are structural headwinds at play that have benefitted Vietnam, starting from the dispersal of manufacturing across the region. Off the back of the trade war and now with Covid-19, many occupiers are seeking alternatives for their manufacturing base around the region.”

pete garrison Logos

The country is also considered as one of the most resilient in the region, with the World Bank still expecting Vietnam’s economy to grow as much as 4 percent this year despite the economic fallout from the pandemic. That’s twice as fast as the 2.1 percent growth the World Bank is predicting for the East Asia and Pacific regions generally.

“As the economy grows, consumers are looking to have better access to daily essentials, perishables and a wide variety of product types — modern warehousing will be a key part of the infrastructure that will be needed to reach those consumers,” Logos’ Garrison said.

In a trend fed by companies seeking to reduce reliance on any single market, global manufacturers are increasingly spreading their sourcing activity beyond China after the Covid-19 pandemic wreaked havoc on production and shipping in the region.

Foreign Investor-Friendly Laws

“There’s a diversification in supply chains going on for security reasons, after recent events disrupted the supply chain,” said Frederick Burke, partner at law firm Baker McKenzie. “The move from the just in time to just in case supply chain model is taking root and people look at Vietnam as one of the options.”

fred burke baker mckenzie

Frederick Burke, Baker McKenzie

Vietnam recently ratified investment laws that make it a more attractive option for foreign investors, Burke said. For instance, the new statutes now allow foreign firms to have 100 percent ownership of warehouse facilities, he said.

The country has also kept in step with the transition to sustainable sourcing approaches by facilitating the adoption of renewable energy such as wind and solar in these industrial projects. “That’s helping people to choose Vietnam as a location for their supply chain,” Burke said.

Within Asia Pacific, investors have $20 billion of capital ready to be deployed in logistics properties this year, according to estimates by JLL. A chunk of that dry powder could be invested in emerging markets across Southeast Asia, said Stuart Ross, head of industrial properties in Southeast Asia at JLL.

E-commerce Booms in Southeast Asia

“There’s a lot of growth in Southeast Asia, particularly with the growth of e-commerce,” Ross said. “There’s been a very strong push towards digital purchases and a greater amount of online activity for retail sales, which is driving faster deployment of capital in these emerging markets into warehouse and logistics properties.”

stuart ross jll

Stuart Ross of JLL

With an e-commerce sector that is growing at more than 40 percent annually, according to a report released by Bain & Co, Google and Temasek in October last year, making it one of the fastest growing regions. The study estimated that the annual gross merchandise value of the Internet economy across Southeast Asia will grow to $300 billion by 2025 from $100 billion last year.

The Vietnamese government wants to get 55 percent of its 97 million people to use e-commerce by 2025, generating annual revenues of $35 billion, Gia Long Nguyen, special counsel at Baker McKenzie said. This online shopping push is whetting the appetite of Baker McKenzie’s foreign clients, who are increasingly looking at opportunities to develop logistics properties in Vietnam, he added.

The live panel session, which was sponsored by real estate software provider Yardi Systems, was viewed by more than 460 attendees, including executives from Blackstone, Brookfield, Morgan Stanley and Goldman Sachs. Together with the two earlier sessions, including the spotlight interview with Warburg Pincus head of Southeast Asia Jeffrey Perlman, and a panel on investments in core markets in the region on 14 July, the MTD TV APAC logistics series has now been viewed by more than 5,200 people.

Note: this story has been updated to indicate Vietnam’s annual e-commerce revenue, as cited by Gia Long Nguyen, of $35 billion. Any earlier version had listed the figure at $25 billion. Mingtiandi regrets the error.

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Filed Under: Past Events Tagged With: Baker McKenzie, daily-sp, Featured, highlight, Logistics, MTD TV, MTD TV Video, Vietnam

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