Despite some hurdles, investment continues to pour into Vietnam’s industrial real estate sector. This is fueled by strong demand outpacing supply, a surge in mergers and acquisitions, ongoing improvements to legal and infrastructure frameworks, and a growing trend towards sustainable development.
Expanding supply on par with rising demand
Market demand is on the rise, driven by a steady flow of investment capital into manufacturing. While foreign direct investment (FDI) pledges rose by a modest 1% year-on-year as of November, FDI disbursement jumped to US$21.68 billion, a significant 7.1% growth.
Although global economic uncertainties and geopolitical tensions have slowed FDI growth recently, experts predict that FDI disbursement will surpass last year’s figures.
“Foreign investors remain confident in Vietnam’s potential and continue to invest in existing projects,” market research firm Avision Young Vietnam said in its fourth-quarter report.
This confidence is reflected in the high-profile visits from global giants throughout 2024. In a landmark move, tech titan Nvidia partnered with Vietnam to establish an AI Research and Development Center and an AI Data Center in early December. Following closely, major U.S. semiconductor companies like Intel, Ampere, and Marvell explored investment opportunities. And just recently, Google officially launched its Vietnamese entity.
Last year saw a wave of manufacturing projects setting up shop in Vietnam’s major industrial parks, attracting developers eager to capitalize on this growth. The DEEP C Industrial Park in Haiphong City, for instance, secured US$169 million in additional investment in November, while Sembcorp Group reinforced its commitment to VSIP Industrial Park.
Domestic investors are also actively developing industrial infrastructure. KCN Vietnam Group JSC, for example, launched four new projects in key economic zones in both the north and south this year, adding nearly 400,000 square meters of ready-built factories, warehouses, and mixed-use facilities.
Beyond infrastructure development, demand for industrial land leases continues to climb. Electronics, machinery, and ready-built warehouse development are the key drivers in this quarter. Ready-built factories are also in high demand, particularly from the plastics, electronics, and metal fabrication industries.
Rental prices are rising faster in the north, fueled by demand for high-quality industrial zones. Average rents in the north increased by 1.2% quarter-on-quarter, while remaining stable in the south. Despite a 14% quarter-on-quarter decrease, net absorption in the northern key economic zone surged by 32% year-on-year, outpacing the south, according to the third-quarter report by market research firm Cushman & Wakefield.
Modern warehouse and factory spaces are also attracting tenants, with high net absorption rates. JLL Vietnam’s third-quarter report showed that alongside strong demand from the manufacturing sector, the warehousing sector, particularly third-party logistics providers (3PLs), is showing signs of recovery.
A promising 2025
Many experts expressed optimism about 2025, with demand exceeding supply across the board. “Investors are drawn not only to Vietnam’s favorable policies, investment environment, demographics, and urbanization, but also to the high demand in key sectors like industrial and logistics, housing, offices, and retail,” Avision Young Vietnam noted.
The impact of potential U.S. tax policies following Donald Trump’s presidential election victory in November is a key consideration. However, most analysts said the impact on Vietnam, including its industrial real estate sector, will be positive.
Cushman & Wakefield pointed to the 2017-2018 period, when Vietnam’s industrial real estate benefited from similar policies. Global manufacturers diversified their supply chains, expanding production beyond China.
Future supply is expected to increase significantly, thanks in part to a wave of mergers and acquisitions in the industrial real estate sector, with many foreign investors acquiring projects from domestic players.
In the first nine months of the year, industrial real estate dominated M&A activity, accounting for 91% of the total US$178 million transaction value. This vibrant M&A market is fueled by government initiatives to boost key infrastructure, such as the North-South Expressway and Long Thanh International Airport, according to Cushman & Wakefield.
Another positive development is Vietnam’s ongoing efforts to improve its legal framework, including regulations related to industrial real estate. Coupled with increased investment in infrastructure, these efforts enhance Vietnam’s attractiveness to foreign investors.
The growing trend towards green development is also expected to boost industrial real estate. Notable examples include Hitachi Energy’s LEED Gold-certified transformer factory in Bac Ninh Province and Lego Vietnam’s factory in Binh Duong Province, the latter aiming for LEED Gold certification for the entire project and LEED Platinum for its office building.
Industrial park developers and secondary investors are also getting on board with green development. In July, KCN Vietnam Group JSC announced its focus on green building, with the goal of ensuring all future industrial real estate projects for lease meet green and sustainable building certifications. This year, the group broke ground on two high-quality, ready-built warehouse and factory projects. The first, located in Sub-zone D of Nhon Trach VI Industrial Park in Dong Nai Province, aims for LEED Gold certification. The second, in DEEP C Industrial Park in Haiphong City, is targeting LEED Silver. “This reflects the growing market demand for green buildings”, A Cushman & Wakefield said.
Between 2024 and 2027, the supply of industrial real estate is projected to grow substantially. Industrial land in key economic zones in the north and the south is expected to rise by 10,600 hectares, with an annual growth rate of 7.5%. The ready-built factory and warehouse segments are projected to expand at 5.9% and 10.1% annually, respectively.
Avision Young predicted that clean, ready-to-lease industrial land with long-term leases, complete infrastructure, and excellent connectivity will be highly sought-after. Other attractive options include ready-built factories and warehouses located near supplier networks and distribution and logistics centers with convenient access to major cities.
