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CBRE | Market View | July 2012

Ready built factories & Warehouses facilities and locations – current conditions & future trends

Presented by: Hieu Le, Senior Manager, Industrial & Logistics ServicesJuly 31st, 2012


AGENDA

CONDITIONS

RENTS & LOCATIONS

FUTURE TRENDS

Q&A

CONCENTRATION MAPIndustrial Park – Export Processing Zone - Hi Tech Park – Economic Zone

CBRE | Market View | June 2012

Conventional Modern standard

RBF / WAREHOUSE LOCATION - SouthCurrent conditions

RBF stand alone campus

Front office + loading dock

Mezzanine office + dock + ramps

Factory cum warehouseCompete with logistics provider

Single storey with no supportingFacilities – Shared campus

Bulky & Inefficient design


Hochiminh City

Dong Nai

Binh Duong

Long An

RBF / WAREHOUSE LOCATION - SouthRBF inside Industrial Parks

• 80% direct from IP –20% from IP tenants

• Foreign developer prefers modular medium size (1,000 / 2,000 sqm).

• Supporting facilities are more nice to have.

• HCMC prefers light assembly. Dong Nai are still with textile & garment. Binh Duong F&B and consumer good. Long An & Tay Ninh are more open on industries restriction

• Future location: North – South


Hochiminh CityBinh Tan, Tan Binh, Dist 12Binh ChanhDist 2, Thu Duc

Dong NaiBien HoaNhon Trach

Binh DuongDi AnThuan An

Long AnDuc HoaBen Luc

RBF / WAREHOUSE LOCATION - SouthRBF Outside Industrial Parks

• Non-IPs RBFs normally locates in close distance to the key IPs and key infrastructure (i.e. seaports and airports)

• Size varies greatly (200m2 – 5,000m2) and do not meet standard.

• Relaxed industries restriction and very flexible commercial terms.


For air logistics, 10 km radius from TSN airportFor sea logistics and domestics distributionFor sea logistics, serving existing and future sea ports

RBF / WAREHOUSE LOCATION - SouthWarehouse in and outside Industrial Parks

• 80% direct from IP –20% from IP tenants

• 80% warehouse supply for sea logistics – 20% for air logistics

• Warehouse supply for air logistics is still limited though both the government (i.e. Vietnam Airline, Ministry of Defence) and international services providers (i.e. DHL, FedEx,…) have recognized the increasing demand and started to make investment to build up facilities (i.e. Saigon Air Cargo terminal).

• Long term opportunities for air logistics facilities in Long Thanh international airport in Dong Nai as there is no warehouse development to date to cater for this airport.


NB: Above based on Landlord quoted Asking Rentals p/sqm , p/month

RBF / WAREHOUSE RENTAL - SouthRental & Leasing Cost Ranges

• RBF Rental is VAT exclusive and is quoted for factory floor. Many RBF developers quote a flat rate for both office and factory floor, some marks up by 25% to 50% for office floor.

• RBF Rental reflects IPs location and factory’s overall park quality. The highest achievable rental in SKER is $US6.5/m2/month reflected by prime location such as options available in EPZ HochiminhCity where tenants are entitled to VAT and import duty incentives & very close proximity to ports and central business district. The lowest achievable rental in Southern Vietnam is $US2/m2/month reflected by non-prime location in IPs in Dong Nai / Binh Duong for RBF at acceptable quality.

• Warehouse rental normally 20% to 30% lower than RBF rent within the same area.

Region HCMC BINH DUONG

DONG NAI

LONG AN

IP RBF ‐Lowest

$2.5 $2.4 $2 $3.1

IP RBF –Highest

$6.5 $4.5 $4.5 $1.7

WarehouseLowest $2.5 $2.1 $1.5 N/A

WarehouseHighest $4 $3.4 $3 N/A

• Average RBF rental inside industrial parks across provinces show not much difference. This is because premium rents from foreign developers balanced out by lower rates coming from the majority of local developers.

• Average RBF rental outside industrial parks follow the same trend

• Rental difference ratio between RBF inside industrial parks and outside industrial parks ranges from 1.5 to 1.8, taking into account different factors such as access to roads, building conditions, utilities readiness, amenities, licensing & human resources support are in favour of RBF inside industrial parks. The ratio is lowest for Hochiminh City at 1.5, followed by Dong Nai at 1.63 and by Binh Duong and Long An at approximately 1.8

RBF / WAREHOUSE RENTAL - SouthIP versus Non IP

NB: Above based on Landlord quoted Asking Rentals p/sqm , p/month

Future OutlookWhere do we go from here?

As China is losing competitiveness and Myanmar looming as a major alternative location for investment

Future OutlookAutomotive & Electronics

Vietnam, 4th largest motorcycle market behind China, India, Indonesia2.7 million units in 2010, 20% increase

1. Honda’s 3rd Motorcycle Plant in the North: Dong Van II Industrial Park, 8% sales volume increase to 500K units p/year

2. Yamaha , in Noi Bai Industrial Zone is seeking to expand production capacity

3. Mazda, acquired land and commended auto assembly in Chu Lai

4. Nokia, $300 mil production started in April 20125. Bosch, $186 mil massive growth in Dong Nai

Auto Production: a key Vietnamese Industry by 2020 -– (Vietnam Auto Development Strategy) : Tax breaks , Land Lease incentives

Chu Lai Open Economic Zone, Central Vietnam (Quang Nam) will become a Auto Manufacturing Support hub in with a target for 40-80% of auto part

Fanyu,, Nanshan

Dong Nai

•Consolidating two Chinese factories into 1 building in Vietnam due to:- supporting suppliers in Vietnam- infrastructure in Vietnam

• - significantly reducing costs by consolidating in 1 building at a total costs of US$ 88 million

• (2009) Long Thanh, Dong Nai, Vietnam – digital camera factory dedicated to manufacturing compact cameras and SLR models


Tilburg, Netherlands

Dong Nai

•The first hi-tech CVT push-belt production site for Bosch in Asia and the second of its kind worldwide after Tilburg in the Netherlands due to:- Rising demand from Bosch’s customers for CVT (continuously variable transmission) technology located in Asia (Japan & China)- Infrastructure in Vietnam (i.e. Long Thanh airport)

• - Educated labor force• - Also open its software & engineering in HCMC

in May 2011

• (2011) Long Thanh, Dong Nai, Vietnam –automotive push belt.


Bosch, From Tilburg/Netherland to South Vietnam

Shanghai, China

• Japan is Vietnams 4th largest export partner• 1 H 2011, $US300 million, 86 new projects• Japan’s ‘post disaster’ recovery has created

opportunities for Vietnam as a safe cost effective / stable production base

• Kyocera Mita - $US250 million laser printer factory• The key to luring Japanese investment is

by creating supporting industriesInfrastructure (power, roads, etc.)Legal improvements

• Japan International Cooperation Agency (JICA) is boosting Vietnams supporting services for Japanese manufacturers through ODA loans . Since 2009, targeting mechanical, automotive and electronic SME’s

• IP Investment – Northern Bac Ninh “ Vietnam Japanese Supporting Industrial Park No. 1”, NEXT Long Duc IP in Dong Nai : Sojitz / Daiwa / Kobelco

• Gov. considering establishing IZ’s for Japanese only

Future OutlookJapanese

Suzhou, Dailen

Dong Nai

Lixil, From Dailen/Suzhou to South Vietnam

•Moves to Vietnam due to- Close to aluminum reserves- Less regulations on environment

• - Lower labor cost• - Expansion out of Thailand / China

• (2012) Long Duc, Dong Nai, Vietnam – $441 million plant to produce high-quality building materials from aluminum for export (production base for aluminum products)

Future OutlookJapanese

• As increased foreign manufacturers establish their production bases, supporting industries / suppliers need to be created to ensure operational efficiency

• Dedicated Industrial clusters are required reflecting IP’s in established manufacturing locations e.g. China

• Steps in the right direction:MOF recent circular extending Tax Incentives for supporting industries in:1. Mechanical Engineering2. Apparel & Footwear3. Electronic4. IT5. Auto Assembly

• Tax exemptions for importation of machinery, equipment etc for production for the industries

Future OutlookSupporting Industries (i.e. electronics)

TEXTILE & GARMENTS

• UP 31% ($US10.5bil.)

FOOTWEAR • UP 31% ($US4.7bil.)

ELECTRIC & ELECTRONIC PRODUCTS

• UP 75 % ($US6.7bil.)

RICE • UP 9.13 %($US2.8 bil.)

SEAFOOD • UP 27% ($US4.41bil.)

RUBBER • UP 60% in Value &2.4% in volume($US2.2 bil.)

COFFEE • UP 64% in Value &7% in quantity($US2.2 bil.)

Future OutlookTextile & Garment and Footwear

As HCMC, Dong Nai and Binh Duong focus on less labour intensive sectors + labour cost in these areas is rising, Footwear & garment and textile shall move to Long An & Tay Ninh (i.e. Ching Lue, Puma)Investment in Long An by Countries & Sectors as of December 2010

Future OutlookLogistics

• Towards the South, near the future ports

• Logistics services providers, international and local alike, are in expansion mode in Dong Nai, Vung Tau, Binh Duong and Hochiminh City.

• Logistics component within IP

• FMCG (P&G, Colgate Palmolive, Pepsi) and F&B (Nestle, Saporro, Vimamilk)

• Total area: 50,000 m 2

• Diverse in type and area (250m 2 –5,000m 2 per factory )

• Without office and a shared services business centre to provide all services to the campus’ tenant at a cost when needed

Workshop / Warehouse TrendLandlords going smaller

• Ready Built Factory Developers Now Only build upon tenant’s commitment

• Willing to split up the space to accommodate smaller prospects

• Consider build up to make full use of the land.

Workshop / Warehouse TrendLandlords going Build To Suit & Build up

Standard Factory Building

Ascendas RBF Campus Layout

Workshop / Warehouse TrendIPs/Tenants builds dedicated RBF campus

Khai Toan RBF Campus Layout in Dong Nai

Que Vo R&D Campus in Bac Ninh

Workshop / Warehouse TrendSea logistics parks

ICD Long BinhContainer yard

ICD Long BinhBonded warehouse

Mapletree Logistics Park

CT Commercial Logistics

• Germadept Air Cargo Terminal @ TSN

• Established in as a JSC among the Ministry of Defence, Southern Airports Corporation, Gemadept Corporation.

• Operated since Oct, 2010, 14.3 hectare including: 91.000m2 warehouse & the apron of 52,000m2 capable to accommodate 3 Boeing 747-400F or 8 Boeing 737

• Provide full package services for airliners, 3PL and end occupiers

• Rent ranges approx $8/m2/month for warehouse, $12/m2/month for office

• Established as JSC b/w Vietnam Airlines, NCTS and Interserco in 2007

• 22.000 m2 warehouse & office at Noi Bai airport & ICD My Dinh

• Provide full package services• Rent ranges from $6 – 8$/m2/month for

warehouse, $15/m2/month for office• Sample tenants: Thai Airway, Eva Air, China

Air, Japan Airline, Air France., DHL, TNT Schenker, FPT, Viettel, IBM

• ICD My Dinh @ Hanoi

Workshop / Warehouse TrendAir logistics parks


187 U.S. and Canada Offices

14 Latin America Offices

109 Europe Offices

25 Middle East and Africa

Offices

55 Asia Offices

30 Australia & New Zealand Offices

Thank you for your attention.

www.cbrevietnam.com

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