Boston, MA -- (ReleaseWire) -- 02/11/2014 -- We believe that despite the continuing soft economy and domestic tensions surrounding the election, Vietnam's commercial construction outlook is positive and driven by the rising demand for industrial, retail and office real estate space. In turn new construction projects are boosting the existing real estate sectors offering new, modern developments. However, as our forecasts show, these developments are having a negative effect on rates in some areas as new capacity becoming available is driving down rates in the short term.
After largely succeeding in its efforts to curb inflation, the Vietnamese National Bank has relaxed interest rates from a historic high of 15% to 7% as of July 2013. Efforts to reduce capital controls and lending restrictions have met with mixed success as the government continues its efforts to attract foreign investment through industrial park (IP) and Economic Zone (EZ) development.
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While office and industrial rents have remained low through 2013, demand for retail space has outstripped supply and has outperformed other sectors as an increasingly middle income urbanised class boosts overall consumption rates. Top priorities through 2014 will be economic, increasing GDP growth and attracting more diversified sustained investment, as the market continues to relax restrictions on property and firm ownership.
Latest data from the Vietnam General Statistics Office reveals that the construction sector grew by 5.8% in real terms in 2013, faster than the -1.0% and 2.1% print in 2011 and 2012 respectively. This is in line with our view that the recovery in Vietnam's construction sector will be sustained in the next few quarters.
Moreover, the revision of the land law to curb compulsory government land purchases for socio-economic development, which takes effect on July 1, will encourage investment and project developments in the future, as it improves the regulatory environment and makes Vietnam a safer and more attractive proposition for construction firms and property developers.
- International freight services provider Zenith Global Logistics has expanded its warehousing facility in Ho Chi Minh City, Vietnam, according to the Journal of Commerce. The facility was expanded as part of the company's effort to ensure it is able to keep up with the increasing demand for humidity-controlled warehousing space in the region. The facility, which will house goods and cargoes destined for the US, covers 7,500m2.
- In the non-residential building sector, we have seen a recovery in Vietnam's manufacturing production activity, with the HSBC Purchasing Index above 50.0 level since September 2013 (a signal of expansion in the manufacturing sector), the growing domestic demand for manufacturing goods could increase demand for non-residential buildings to support production activity.
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