Factors affecting investors’ decision to rent a factory or construct a new factory

Deciding whether to rent a factory or construct a new factory has a significant impact on production and business activities. Investors need to carefully consider the following factors: business strategy, investment costs, progress requirements, commercial advantages… before making a decision.

Business strategy of the enterprise

Building a new factory is a long-term and synchronous solution right from the beginning of the project. Newly built factories are designed to suit the demands of each factory, each production line, ensuring the production process as well as the management of each enterprise. In addition, the construction of a new factory also allows investors to be more active in the operation, maintenance and production expansion.

Renting a factory will be more suitable for FDI enterprises coming to Vietnam for the first time, with an orientation to expand production in the medium term (5-10 years). At this time, the decision to rent a factory will save a lot of time, costs and construction investment procedures. When renting a factory, the infrastructure is already available, it is only necessary to invest in an M.E.P system suitable to the production of each factory. However, because the M.E.P system is constructed after the infrastructure, there will be certain difficulties in synchronous connection with the existing infrastructure system.

Xây mới hay thuê nhà xưởng: các yếu tố nhà đầu tư cần cân nhắc trước khi quyết định

Construction of M.E.P system at HAEM VINA factory No. 3 – a rented factory project in Song Khe – Noi Hoang Industrial Park, Bac Giang, that DELCO is the Design – Build General Contractor for M.E.P systems.

Investment budget

Because of the high synchronization, new factory construction projects often require quite large initial investment capital, including costs of land procedures, costs of design, construction, and licensing.

Dự án xây dựng nhà máy 3 tầng tại KCN Hòa Mạc, Hà Nam của Tổng thầu xây dựng DELCO.

A 3-storey factory construction project in Hoa Mac Industrial Park, Ha Nam, by DELCO as General Contractor.

If choosing the option of renting a factory, businesses only need to invest in the construction of an safety, efficiency M.E.P system that can ensure production stability. Investment cost of these projects are usually lower than building a new factory. If the investor’s budget is still limited, especially after the Covid-19 pandemic, renting a factory is the most reasonable choice, helping to optimize cash flow and optimize investment costs.

Progress requirements

Renting factory is suitable for production projects that require urgent progress to meet the needs of customers. When renting a factory, businesses will save time and progress in carrying out procedures related to construction legal documents. However, after constructing M.E.P system and connecting the production line with the existing infrastructure system, due to the lack of synchronization, the investor will take a long time to carry out the procedures for reviewing the environmental impacts, approving the fire prevention and fighting system, etc. of the factory.

Newly built factories have synchronization from design drawings to construction drawings and the construction process. Construction contractors can advise and help investors complete the procedures for applying construction permits, fire prevention and environmental protection procedures, etc. right from the design stage. After the completion of the construction process, the approval and acceptance to put the factory into use will save time and be more efficient.

In addition, many manufacturing industries require special technical requirements: such as printing factories which require the high stability of the foundation, pharmaceutical and food factories which require very strict control of cleanliness and humidity, pressure, etc. Rented factory cannot exactly meet the specific requirements of these industry, then investors are forced to invest in building a new factory.

Khu vực SMT đáp ứng tiêu chuẩn phòng sạch tại dự án Nhà máy Power Plus Technology do DELCO là tổng thầu thiết kế - thi công, cung cấp giải pháp Smart Factory. Đây là khu vực có yêu cầu cực kỳ cao về an toàn, kỹ thuật và môi trường.

SMT area meets clean room standards, is located in the Power Plus Technology Factory project by DELCO as the Design – Build general contractor and providing Smart Factory solutions. This is an area that meets extremely high requirements in terms of safety, engineering and environment.

Other important factors

When choosing to rent a factory or build a new one, investors also need to consider the following factors:

  • Geographical location
    Choosing the right location to place the factory not only determines the stability of production, but also can optimize many investment costs. When renting a factory, the location selection is limited to the list of factories for lease in industrial zones. When building a new factory, the investor can flexibly choose the location near the raw material areas; choose provinces and cities with many preferential investment policies; …

Lựa chọn vị trí để đặt  nhà máy sản xuất rất quan trọng, chủ đầu tư không chỉ cần quan tâm đến vị trí địa lý, chính sách ưu đãi đầu tư của tỉnh, mà còn phải quan tâm đến các yếu tố địa chất, phong thủy …

Choosing the location to place the factory is very important, the investor not only needs to pay attention to the geographical location, the province’s investment incentive policy, but also to the geological factors, feng shui …

  • Active factors in repairing, renovating and upgrading factories:
    The rented factory is owned by the factory investor, so the repair and renovation will take a long time for the permitting and appraisal procedures…. As for the newly constructed factory, owned by the enterprise, the enterprise can be more active in the plan to expand and renovate the factory.

Whether constructing a new factory or renting an existing factory, the factors of stability, safety and convenience of production must always come first. With experience in the industrial construction industry, DELCO has been a Design – Build general contractor for high-quality factory constructions, designing – building factories for rent, designing – constructing smart M.E.P systems, etc.  building a stable production platform, sustainable development for businesses.