Land charges in industrial zones mount

17:16' 10/04/2008 (GMT+7)
Tay Bac Cu Chi Industrial Zone
VietNamNet Bridge – Land charges in industrial and export processing zones have risen by 30-50% compared to one year ago. The highest charge is applied in HCM City-based Tan Thuan Export Processing Zone, over 100/sq.m/year.
In contrast to the serenity of the apartment market, the market for industrial zone real estate is bustling at this moment, with foreign direct investment flow rising.
Overloaded industrial zones
According to David W. Neal, Logistics and Industrial Manager of CB Richard Ellis Vietnam (CBRE), Vietnam has 150 industrial and export processing zones and many more are being built, but they can’t satisfy demand.

Most industrial and export processing zones in HCM City and some southern provinces of Dong Nai and Binh Duong are overloaded, with nearly 100% of land occupied. Many industrial zones are developing in their third and fourth phases.



Le Anh Tuan, Vice Head of the HCM City Export Processing Zones Authority (HEPZA), said the increase of land charges at industrial and export processing zones is up to the market rules because the FDI flow has been rising quickly since Vietnam joined the World Trade Organisation (WTO).



The director of a company located in a southern industrial zone said the current land charges in industrial zones are 30-50% more than during the same period of last year. He said his company plans to expand operation so he wanted to hire land in Tan Phu Trung industrial zone in Cu Chi District, HCM City, where land charges are $10-15/sqm/year higher than last year.



The highest land charge belongs to the Tan Thuan Export Processing Zone at over $100/sq.m/year. It is followed by Tan Binh and Linh Trung industrial zones in Thu Duc, HCM City, and Vietnam-Singapore industrial zone in Binh Duong province, with land charges of around $70-80/sq.m/year. However, these zones are nearly full so only businesses with abundant financial resources can hire land there.



It is said that land charges in expanding industrial zones like Tan Tao, Vinh Loc, Tan Phu Trung and Tay Bac Cu Chi will increase soon.



Site clearance hinders expansion of industrial zones



According to Dang Ngoc Thanh, Deputy General Director of the Cu Chi Industry and Trade Investment and Development JS Company, the investor of Tay Bac Cu Chi Industrial Zone, though land charges in industrial zones are increasing, businesses still favour these zones rather than buying or hiring land outside. The reason is that when they build factories in industrial zones they enjoy tax preferences and can avoid land-related conflicts.



Nguyen Dac Trung, a CBRE specialist, said investors prefer to build industrial zones far from HCM City (in Binh Duong, Dong Nai and Long An) because land prices in these provinces are cheaper though it takes longer to regain capital than by investing in apartment projects.



Trung said the traditional model of industrial zones (investors hire land then build necessary infrastructure and lease land again) is not attractive to investors anymore. Investors now build infrastructure and factories for lease so businesses can immediately do business when they get into industrial zones.



The biggest difficulty for industrial zone developers is site clearance and compensation because the areas of these zones are hundreds of hectares or even thousands of hectares of land. This issue affects the expansion of old and construction of new industrial zones.



“The increase of land and construction material prices also contributes to pushing up land charges in industrial zones,” explained Dang Ngoc Thanh, Deputy General Director of Cu Chi Industry and Trade Investment and Development JS Company, the owner of Tay Bac Cu Chi industrial zone.