Vietnam’s geographical location, skilled and relatively inexpensive workforce, rising middle class, rapid e-commerce adoption, growing manufacturing sector, and intergovernmental projects aimed at boosting its connectivity within the Association of Southeast Asian Nations (Asean) bloc by 2050 have made its logistics market a hot destination for investment by foreign companies, particularly Asian ones.

The Vietnam Logistics Report 2021, by the Vietnamese Ministry of Industry and Trade, notes that in the first nine months of last year, the number of newly registered transport and warehousing enterprises in the nation increased by 4.61%, with registered capital up 43% over the same period in 2020. Many logistics companies in Vietnam, according to the report, grew in revenue and profit, most by double-digits.

The country has, the ministry states, more than 4,000 enterprises operating international logistics services. About 95% of these firms are small or micro enterprises, the Vietnam Logistics Service Association estimates, with most of the revenue created and market share in the sector belonging to foreign companies.

Topping off the rush to invest in the industry was Singapore-based GLP, Asia’s biggest warehouse operator, which established on January 21 its first Vietnamese logistics development fund, GLP Vietnam Development Partners I (GLP VDP I), with an investment capacity of US$1.1 billion.

And Singapore’s leading homegrown logistics service provider YCH Group and Vietnamese conglomerate T&T Group are co-developing their US$200 million Vietnam SuperPort near Hanoi. The project will be Vietnam’s first multimodal logistics hub, which is part of the ASEAN Smart Logistics Network (ASLN) that is expected to extensively integrate the economies of the bloc over the next three years.

In May last year, ESR Cayman, the largest Asia-Pacific-focused logistics real estate platform, and BW Industrial Development, the leading logistics and industrial real estate developer and operator in Vietnam, launched their joint venture in the country, marking ESR Cayman’s first foray into the Vietnamese market. BW is a joint venture between global private equity firm Warburg Pincus and Becamex, an industrial infrastructure developer in Vietnam.

Big city focus

GLP says its US$1.1 billion fund “has received commitments from a well-diversified investor group across Asia, Europe, North America and the Middle East, including pension and sovereign wealth funds, and insurance companies”.

The Singapore-based firm notes that GLP VDP I fund will focus on developing modern and environmentally-friendly logistics facilities in Greater Hanoi and Greater Ho Chi Minh City, with six seeded development sites and a total land area of close to 900,000 square metres.  “It has a robust development pipeline of further opportunities,” GDP adds, “and is set to be one of the largest logistics development funds in Southeast Asia.”

Through this fund's establishment, GLP welcomes several new investors to its fund management platform, including the Dutch pension fund manager APG Asset Management (APG AM) and Manulife, a Canada-based global financial services provider.

GLP entered the Vietnamese market in 2020 by forming the domestic platform SEA Logistic Partners (SLP). Chih Cheung, a founding partner of SLP, says, “Vietnam’s logistics industry is also experiencing strong growth due to strong domestic consumption from a rising middle class, and rapid e-commerce adoption.”

Graeme Torre, managing director and APG AM's head of Asia-Pacific real estate, notes: “With the continued global supply chain shifts to Vietnam, a growing middle class to uphold economic growth, as well as having one of the fastest growing e-commerce markets in Southeast Asia, Vietnam’s logistics is an attractive opportunity for us to enter in the region. Vietnam’s logistics market compliments very well with our existing regional logistics exposure, while also offering very strong risk-adjusted returns that will benefit our pension fund clients and their participants.”

Superport plans

In late December, Singapore’s YCH Group and Vietnam’s T&T Group started the construction of Vietnam SuperPort in Vinh Phuc province next to Hanoi. It is the largest logistics infrastructure project spearheaded by a Singaporean company in Vietnam, with a planned area of more than 83 hectares and a cargo capacity of about 850,000 20-foot-equivalent units. The facility is scheduled to go live in 2024, with phase 1 set to be completed in stages between 2022 and 2023, while phase 2 is to be completed in stages between 2024 and 2025, the year the ASLN aims to integrate the bloc.

With manufacturing shifting to Vietnam, it has emerged as a global manufacturing hub, while growing logistics and e-commerce have been among the fastest-expanding sectors in the nation. The Vietnam SuperPort is expected to further fuel the nation’s logistics development as it is designed as an integrated dry port and advanced supply-chain centre.

With its strategic foothold near the capital city of Hanoi, the SuperPort will be a key connecting node for global and regional trade, and supply chains between Vietnamese, Chinese, Asean and other regional and international markets. The Vietnam SuperPort and its environs of about 20 industrial parks will show the advantages of multi-modal transportation through its road, rail, air and sea linkages, with road and rail linking China’s Kunming City in Yunnan province to Hanoi and eventually the Vietnamese northern port city of Hai Phong.

The journey for the project started in November 2020 when the ASLN was launched to support the ASEAN Connectivity Master Plan 2025. The regional network is a collaborative platform that aims to promote logistics connectivity and integration within the bloc. 

The ASLN’s second project after the Vietnamese hub is the US$200 million Phnom Penh Logistics Complex (PPLC) in Cambodia, set to break ground in 2022. YCH is also in charge of developing PPLC, choosing the Cambodian capital as its next project after the Vietnamese capital. For its part, Cambodia has just set logistics as a priority sector under its newly-passed investment law, qualifying for generous tax incentives.

Real estate

Real estate logistics platform ESR Cayman made its first entry into the Vietnamese market last May by launching a joint venture with BW Industrial Development. Jeffrey Shen and Stuart Gibson, ESR co-founders and CEOs, said at the time: “Vietnam’s industrial and logistics real estate sector is coming of age. It is one of the most promising markets within Southeast Asia, benefitting from a range of favourable macroeconomic factors, including its high and stable GDP growth rate, growing income level and thus emerging middle class, rapid urbanization and infrastructure development.”

The pair's new business is the My Phuoc 4 Industrial Park in Binh Duong province next to Ho Chi Minh City, Vietnam’s southern economic hub. With construction completed also last year, the zone has a total of around 240,000 square metres of logistics and light industrial facilities.

As for BW, the Becamex-Warburg Pincus joint venture has been expanding across Vietnam. BW says that it has completed the acquisition of 74,000 square metres of prime land in Bac Tien Phong Industrial Zone in the northern province of Quang Ninh, developed by DEEP C Industrial Zones, an industrial real estate project backed by Belgian developer and operator Rent-A-Port. The deal marks BW’s first footprint in Quang Ninh and its third collaboration with DEEP C.

More in pipeline

Demand for industrial and logistics real estate, in addition to ready-built factories and warehouses, will continue to be the core of enquiries in 2022, John Campbell, manager of Industrial Services at Savills Vietnam, told Vietnamese media late last year.

At present, Ally Logistic Property (ALP), Taiwan’s largest logistics property developer is eyeing an entry into Vietnam after making a US$1 billion investment to develop smart warehousing solutions in Malaysia.

“Malaysia is just the start,” states Charlie Chang, CEO of ALP, adding that his firm is set to announce its expansion plans to Vietnam this year. “We want to invest in Thailand, Vietnam and the Philippines. Once the Malaysian project has started, we will expand to one country every year.”