Industrial Real Estate Trends
Industrial Real Estate Demand After the Pandemic
Industrial real estate has become a hot market recently, with numerous projects being launched and a significant increase in market demand seizing new opportunities post-Covid-19. However, investors need to think carefully to identify sustainable opportunities and value for themselves.
The pandemic acted as a catalyst for the global digital economy, driving up e-commerce market shares for retailers across all markets. According to a report cited by Fibre2Fashion, Vietnam is projected to be the fastest-growing e-commerce market in Southeast Asia by 2026, with a total value reaching up to 56 billion USD, 4.5 times the estimated value for 2021.
Rising Demand for Industrial Real Estate
Additionally, Covid-19 has shifted the balance of global trade. Western countries have recognized the importance of diversifying supply chains and reducing reliance on China. Consequently, several countries, including Vietnam with its numerous advantages, have emerged as promising stars for investment shifts.
Given all these development opportunities, the demand for industrial real estate is expected to explode as supply remains limited.
Industrial Real Estate Trends Dominating in this year
Ready-Built Warehouses
The logistics and warehousing sector is experiencing significant growth, driven by the e-commerce boom and increasing consumer expectations for fast deliveries. Ready-built warehouses for lease provide businesses with immediate access to storage and distribution facilities without the lengthy process of construction. In Vietnam, there is a notable shortage of cold storage near city centers, making ready-built warehouses an attractive alternative for companies needing versatile storage solutions. These warehouses can be quickly adapted to meet various logistical requirements, supporting the dynamic needs of the supply chain.
Cold Storage
One of the most sought-after types of real estate is warehousing, particularly cold storage. Cold storage is a specialized part of the supply chain, thanks to its temperature control capabilities for storing and transporting food or medical supplies, among others. According to a report by Research & Markets, nearly 8 billion USD was invested in developing cold storage warehouses globally in 2020. This figure is projected to rise to 19 billion USD by 2027. These projections are based on the increasing demand for online grocery shopping and the goal of reducing food waste, a key objective of ESG (Environmental, Social, and Governance) commitments for a greener Earth.
Consumer demand for quick deliveries also drives up the need for logistics warehouses in the last mile, closer to customers. Vietnam is developing along the same global trend. However, cold storage facilities near city centers are very limited. Currently, businesses need to rent dry warehouses and convert them into cold storage. When businesses invest in their cold storage, it becomes a crucial advantage for competing with other companies in the same industry in meeting customer demands.
Ready-Built Factories
The demand for ready-built factories for lease is on the rise, driven by the need for flexible and scalable manufacturing solutions. These facilities offer businesses the convenience of moving into a fully functional space without the time and cost associated with constructing a new plant. Vietnam's strategic location, stable political environment, and young, dynamic workforce make it an attractive destination for foreign direct investment (FDI). Companies looking to establish or expand their manufacturing operations can benefit significantly from ready-built factories.
Ready-Built Offices
The rise in remote work and hybrid working models has influenced the office real estate market. Companies are seeking flexible office spaces that can adapt to changing needs. Ready-built offices for lease offer businesses the advantage of quickly setting up operations in a professional environment. These offices are particularly appealing to startups and multinational companies entering new markets. In Vietnam, the demand for ready-built offices is growing as businesses seek efficient and cost-effective solutions to accommodate their workforce.
Data Centers
The pandemic also saw a boom in remote work, video conferencing, and cloud computing. This trend requires data centers with specific conditions. Vietnam is transforming with the boom of e-commerce and the digital economy. However, the current supply of industrial real estate can hardly meet the demands for building data centers to support this growth.
Manufacturing Plants
Demand for manufacturing plants for multinational companies fleeing China surged in the last months of 2021. Vietnam, a country close to China, with stable politics, a young, dynamic, and fast-growing market, has become the destination for foreign direct investment (FDI).
Constant Market Changes
These trends will continuously change depending on the global economic landscape, technological advancements, and pandemics. This will result in the evolving industrial real estate market in Vietnam and globally.
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