Savills Prospects -May 2024: Vietnam Shows Off its Skills, India Connects to Itself, and Finding the Edge in Seoul’s Vibrant Data Centre Sector
Savills Prospects examines the manufacturing, infrastructure and digital trends currently having an impact on Asia Pacific’s industrial real estate sector.
Vietnam industrial keeps moving up the value chain
As the saying goes: a rising tide lifts all boats. In 2023, Vietnam’s industrial real estate sector continued to attract high value manufacturers. As a result, as a market it is moving up the value chain — quickly. With a resilient economy and GDP expected to grow nearly 7% in 2024, investment isn’t slowing. Overseas manufacturers looking to lower costs and secure supply chains are turning to Vietnam. This includes investors from China and the EU, who are focused on high value products. The country’s export-oriented economy is benefitting from these blue chip manufacturers entering the market. Just a few of those include Apple, Samsung and Intel. Additionally the growth of the data centre sector in APAC is underpinning the sector’s development in Vietnam. It is forecast to grow more than 10% per year through 2028. This will only be bolstered by future-facing local developers focusing on ESG.
Infrastructure brings India closer
India is investing over US$130 billion on its transport infrastructure next year. Better facilities around roads, railways, airports and waterways is projected to boost the country’s GDP to US$5 trillion in 2025. It will classify India officially as a developed nation; its GDP will reach US$30 trillion by 2047. Real estate will be among the sectors poised to benefit from improved infrastructure.
Air and highway links are making cities more accessible to each other. Localised metro systems are linking CBDs with previously remote suburbs. The logistics sector is expanding rapidly and higher spec facilities support India’s export economy ambitions. Global equity investors accounted for 47% of all logistics investment in Q1/2024. That will only increase in the coming years. The sector will be an early benefactor of massive infrastructure investment, but it won’t be the only one.
Gaining an edge in the Seoul data centre market
South Korea is among APAC’s most enthusiastic adopters of digital technology. As a result, Seoul, the country’s biggest city, is struggling to meet data centre demand. Cloud operators, e-commerce, and AI usage will double data capacity by 2027. However, roughly 50% of in-development projects are facing completion challenges. The city’s edge data centres now offer investment opportunities for their ability to provide other solutions. Edge data centres are relatively small, and usually below 5MW. They are located in areas where low latency is a must: IoT, gaming, AVR and streaming. As such, they are ideal for repurposed existing buildings and small urban plots. Regulatory changes will increase demand for edge data centres, and open the sector to partnership opportunities.
Author: Simon Smith
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