The industrial real estate market thrives despite geopolitical conflicts
According to experts from Savills Vietnam, from now until the end of 2023, transactions in the global industrial real estate market will continue to take place with a plentiful supply.
After three years of disruption due to the pandemic, the global supply chain is gradually returning to its track. The reality shows that post-pandemic activities and demands are undergoing significant changes.
Notably, geopolitical fluctuations have impacted the flow of international capital into the real estate market in general; they have also affected specific real estate types such as logistics, warehouses, or manufacturing across North America, Europe, and the Asia-Pacific region.
These factors have led to changes in location selection strategies, transitioning from concepts like “offshoring” to alternatives like “reshoring,” “nearshoring,” or “friendshoring.” “Offshoring” refers to a business originating in one country but setting up production lines or using resources from another country to serve its production and business. Conversely, “reshoring” or “nearshoring” involves bringing production back to or near the home country.
Mục lục
North America
“Resilience” has become a crucial keyword for supply chain management units in North America.
However, cost remains the most important factor in choosing production and storage locations. Although opportunities related to “nearshoring” have increased in recent years, particularly for manufacturing units in the Northeast Asia region, many American companies still take advantage of offshoring options in these areas to benefit from lower labor costs.
The 2022 Inflation Reduction Law may change this strategy. Critical U.S. companies, such as green energy and clean technology sectors, are being offered substantial subsidies and tax reductions to relocate their operations.
Similar incentives are also being rolled out by the government through CHIPS (Creating Helpful Incentives for the Production of Semiconductors for America) and the American Science (Law Promoting Semiconductor Manufacturing for America) to reduce the U.S.’s dependence on semiconductor imports from Taiwan and South Korea.
This law comes with a $280 billion budget package, including $39 billion specifically for stimulating domestic semiconductor production, and $13.2 billion for research, development, and workforce training.
This policy has contributed to a surge in construction activities for manufacturing plants in the U.S. Companies like TSMC, Intel, and Samsung have announced plans to build semiconductor manufacturing plants in the country, and over 20 electric vehicle manufacturing plants are expected to be completed by the end of 2026.
Europe
The demand for warehouses in Europe has largely decreased due to the pandemic and the rise of online retail. However, in the medium term, supply chain security and investment in green technologies will significantly impact warehouse demand in this region.
Therefore, “nearshoring” is being used to create additional real estate investment opportunities in Eastern Europe, especially in countries with strategic partnerships with the European Union (EU), possessing a large workforce and competitive pricing.
Emphasizing supply chain protection will gradually affect the demand for warehouses and manufacturing plants in the commercial real estate market.
Focus on the Asia-Pacific Region
China is still considered the “world’s factory,” accounting for about 30% of global production. The country boasts competitive advantages such as relatively well-developed infrastructure, a skilled workforce, and deep integration into the global supply chain.
However, the high labor costs in China have diminished its attractiveness, especially as incentives for businesses to return and establish factories in their home countries are being considered. Foreign companies, like Apple, have reduced the establishment of new factories in China.
When looking for alternatives outside China for manufacturing plants, Vietnam emerges as an ideal destination due to its geographical proximity, skilled labor force with competitive costs, and strong infrastructure development.
This opportunity has brought about positive changes in Vietnam’s industrial real estate market. Mr. Thomas Rooney, Senior Manager of the Industrial Real Estate Division at Savills Hanoi, stated: “The Purchasing Managers’ Index (PMI) for production lines and the Industrial Production Index in Vietnam both showed positive growth in the early months of 2023. The market continues to see significant investment deals and fundamental activities. However, the current global economic situation has led to reduced overall demand. This poses a challenge that the government needs to address promptly and with preventive measures to further stimulate economic development.”
Looking ahead to the near future, Mr. Thomas predicts that industrial real estate transactions will continue to take place until the end of 2023, with a plentiful supply. The attractiveness of provinces like Hai Phong for pre-built workshop supply will continue to increase among investors and tenants. Additionally, Bac Ninh is an ideal choice for both domestic and foreign tenants, as well as developers of pre-built warehouses, as this city ranks third in attracting foreign direct investment (FDI).
In summary, the global shift in supply chains presents numerous new opportunities along with certain challenges. Therefore, the Vietnamese market needs to grasp trends and seize opportunities promptly and comprehensively, in order to make the best use of them and achieve breakthroughs.
Source: Environmental and Urban Magazine.
