Industrial sector to lead property market: JLL

28-Feb-2020 Intellasia | The SaigonTimes | 6:02 AM Print This Post

The industrial sector is still the hottest segment of the Vietnamese property market for the next five years, with demand growing strongly as firms are still looking to relocate from China, according to JLL Vietnam.

The real estate consultancy noted in a statement that even before the trade war between the United States and China had erupted, significant interest from foreign investors had led to an increase in local land value and rental rates.

“Manufacturing is the sector with the most significant investment in the past 10 years, and we predict that it will continue to dominate the market in the next few years,” stated JLL.

The firm expected to see growth in medium to long-term investors in the industrial sector, backed by government support, free trade agreements (FTAs) and movement from China.

“Securing a large number of FTAs has set Vietnam up for a partnership with 60 countries worldwide and supports Vietnam on its path to becoming a new global manufacturing hub,” according to the firm.

The firm added that logistics is expected to be the future of the industrial market. In recent years, increasing demand from the traditional retail sector and continuous growth from the ecommerce sector have put great pressure on existing supply chains, facilities and warehouses.

The fast-changing retail sector will help spur investment activities for the current shortfalls of the industry, JLL predicted, adding that success has never been more dependent on the supply chain.

The firm said the omni-channel model is adding new layers of complexity to retail logistics: It is no longer just getting products onto shelves but making them available anytime and anywhere.

As a new trend in the market, both retailers and mall developers are reinventing themselves with a focus on food and beverages, providing better customer services and applying technology and consumer analytics to enhance their popularity and increase foot traffic.

With consumers increasingly shopping online, buying decisions often rest on how quickly and efficiently retailers can get goods out of the warehouse and into their hands. Yet it comes at a cost, and pressure from ecommerce competitors only adds to the squeeze on retailer margins.

As omni-channel retail evolves and consumer expectations around delivery increase, supply chain and logistics management will be crucial differentiators for retailers, according to the firm.

Offices get bigger and more connected

JLL Vietnam reported that office space remains a hot commodity as rents soar past the recent peak to reach a decade high. The increase in rental rates for Grades A and B was supported by strong demand and higher rental rates for newer office developments. Tenants are struggling to find larger spaces as in the current market, only one Grade A building and ten Grade B buildings can provide a contiguous space larger than 1,000 square meters.

The demand for large office spaces will accelerate in the next few years as coworking operators grow in number and companies look to upgrade their offices to retain talent and expand their businesses.

“Larger and more flexible spaces mean a better chance of collaboration plus energy and space utilisation,” the firm noted.

Meanwhile, the green movement received a tremendous boost when “fine dust” and “virus” became buzzwords.

As people rush to buy masks, landlords are racing to upgrade their buildings to protect workers and enhance profits as investments in indoor air quality and hygiene will help differentiate office buildings from their competitors, according to the firm.

“But sustainability is not just a trend; it has to be the future of work. The next generation of buildings is set to become more ‘green’ with sustainable technologies that save on operating costs and innovative designs that attract more occupiers and tenants,” remarked Stephen Wyatt, country head of JLL Vietnam.

Another JLL report revealed that some 30,000-35,000 units are expected to be launched in HCM City and 40,000-45,000 units in Hanoi this year.

The firm pointed out that the number is subject to a great deal of uncertainty given the government’s tight control over the granting of land use rights and construction licenses.

The strong demand is set to continue and will boost prices further across all sectors. However, demand in the high-end segment, especially among investors, is likely to slow down in the long term as the already-high prices and low rental yield make it a less attractive investment.


Category: Business, Vietnam

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