Key industrial zones in southern Vietnam are poised for a turnaround after a period of stagnation, fueled by rising supply, legal reforms, infrastructure upgrades, and foreign investment.
Supply set to increase
The industrial real estate market in southern Vietnam is expected to accelerate thanks to recent developments. In late September, Binh Duong and Dong Nai received approval for their 2021-2030 development plans, with a vision toward 2050.
Prime Minister Pham Minh Chinh has instructed both provinces to focus on developing high-tech industrial parks to primarily attract foreign direct investment (FDI).
In the first nine months of the year, Binh Duong and Dong Nai secured the fifth and eighth spots among the top 10 provinces for FDI attraction. They also boast the highest industrial park occupancy rates in the southern key economic region.
Data this year indicated that industrial real estate in this region is becoming more attractive. For example, in Dong Nai, fresh investment pledges surged 2.5 times in the first nine months of 2024 to US$683.14 million, according to the Dong Nai Industrial Zones Authority. The average investment capital per project also nearly doubled to US$9.5 million.
However, a lack of available land is an issue in Dong Nai, with the majority of projects concentrated in Nhon Trach (29 projects), Long Thanh (22 projects), Trang Bom (14 projects), and Bien Hoa (4 projects).
Despite the land shortage, the market is expected to benefit from new projects being licensed. For instance, KCN Dong Nai JSC, an affiliate of KCN Vietnam Group JSC, received an investment registration certificate, and two industrial projects in Long Thanh District were approved with a total investment of over VND11 trillion. Additionally, the Bau Can-Tan Hiep Industrial Park Infrastructure Development Project in Long Thanh has recently gained approval.
In addition to new investment plans, some projects are also getting off the ground. Earlier this year, a ready-built warehouse project in the Loc An Binh Son industrial park (Dong Nai) was launched. Also in this province, KCN Vietnam Group JSC plans to start another warehouse project at Nhon Trach 6 Industrial Park, incorporating green building standards, by the end of the year.
After a period of slowdown, the southern warehousing market has showed signs of recovery, with a net absorption of nearly 160,000 square meters in the previous quarter, according to JLL Vietnam.
Warehouses in core areas with convenient access to HCMC remain highly sought after, driven by domestic consumption. “Most new leases were signed by tenants serving the domestic market, including manufacturers and third-party logistics (3PL) providers,” JLL said in its report.
Legal reforms and upgraded infrastructure fuel market growth
The southern key economic region, which includes Binh Duong and Dong Nai provinces, has faced challenges in wooing FDI due to land shortages. These provinces, once considered industrial hubs, have experienced a lack of available land, with the remaining plots too fragmented to attract large projects. Legal issues and limited new industrial park development between 2018 and 2020 further constrained supply.
However, analysts now expect the southern industrial real estate market to recover and regain its position in attracting FDI, driven by improved infrastructure and newly available land for industrial development.
Infrastructure projects are under development across the region, improving both regional and international connectivity. The Long Thanh International Airport and surrounding seaports are anticipated to significantly stimulate demand for industrial zones and warehouses in Dong Nai. In the long term, new highways and regional linkages are expected to further enhance the region’s attractiveness for investors.
“Provinces with remaining land reserves, such as Ba Ria-Vung Tau and Dong Nai, will directly benefit from this new wave of FDI,” said Phu Hung Securities Company.
According to Cushman & Wakefield, industrial park developers are preparing future projects to meet rising demand. The market is expected to see the addition of 6,200 hectares of industrial land by 2027.
In recent years, investors and manufacturers have turned to countryside areas to find competitively priced land. However, as legal issues in traditional markets are resolved, investor interest in the southern region is set to grow. New supply, featuring modern infrastructure and sustainable development criteria, is expected to revitalize the southern industrial real estate market.
