With the Entry of Significant Industrial Players, is Viet Nam Ready?

According to the Viet Nam Foreign Investment Agency (FIA), by 20 March 2023, FDI reached US$5.45 billion, only 61.2% of the figure last year. There were 522 newly registered FDI projects, increasing by 62.1% year-on-year (YoY).

Real estate was the second-largest FDI recipient with investment of US$766 million, equal to 14.1% of Q1/2023 registered FDI. This decreased by -71.6% YoY. Retail, transportation and warehousing secured more investment capital YoY; retail had a registered capital of US$276 million, double that of last year. Transportation and warehousing had a registered capital of US$151 million, increasing by 37%.

FDI investments in 2023 are expected to slow; however, Viet Nam’s industrial market will maintain its popularity with investors with magnets such as a solid labour force, population growth, infrastructure development, incentives for foreign investors and official mechanisms to stabilise the macroeconomic environment.

John Campbell, Associate Director of Industrial Services, Savills Viet Nam, shared: “Multinational companies are still looking to diversify their locations or relocate out of China, and Viet Nam’s industrial market offers favourable investment conditions. Established investors and tenant groups come from Korea, Japan, Taiwan and China, however, more needs to be done to attract investors from the US and Europe”.

Solid investors include Foxconn; the enterprise recently signed an MOU on a 50.5 ha piece of land in Quang Chau Industrial Park, with a total investment of US$300 million. Samsung will increase its investment in Viet Nam to US$ 20 billion and start focusing on artificial intelligence (AI) and big data.

According to Savills Asia Pacific Investment Quarterly Report (APIQ), major deals in Q4/2022 comprised Matsuya R&D (Japan) investing an additional US$6.7 million in its production facility in Ho Nai Industrial Park (Dong Nai Province). Giant Manufacturing (Taiwan), famous for its bicycles and spare parts, invested an additional US$13 million in VSIP 2 Industrial Park in Binh Duong. Taihan Precision Technology invested US$5.3 million in Cam Giang, Hai Duong.

Recently, a delegation of 52 US companies, including Boeing, Coca-Cola, Meta, SpaceX, Netflix, and Apple, visited Viet Nam to identify investment opportunities. This highlights Viet Nam’s potential to become a hub for electronics, technology or high-value industries.

John Campbell noted that the industrial and manufacturing sector will continue to lead foreign investments in industrial land and high-quality ready-built stock. However, industrial land banks remain limited, and occupancy is high. For example, some southern provinces like HCMC, Binh Duong and Dong Nai have occupancy above 95%. Northern provinces like Bac Giang and Hai Duong are also in demand with occupancy exceeding 96%.

Limited vacancy impacts leasing activities, and new supply is restricted by slow site clearance and difficulties with compensation costs and land price frameworks. These issues challenge developers keen on establishing new industrial parks or converting agricultural land into industrial land.

For supply to meet demand, investment, legal, and approval processes need adjustments. Developers are keen on compensation and site clearance to become more efficient and faster. Official legal procedures also need to be streamlined, so that investors and developers can obtain master planning approval, construction permits and land use certificates with greater ease.

There is also increasing demand for high-quality products that promote green features and smart technologies. Projects such as Green Park Vinh Phuc  and Logos VSIP Bac Ninh 1 Logistic Park (Bac Ninh) will deliver warehouses, factories and other facilities that speak to this demand.

John Campbell said that Viet Nam’s industrial real estate market has the potential to develop more diverse products, such as data centres, cold storage and logistics facilities. Key opportunities in logistics are last-mile delivery and implementation of the 4.0 logistics system. The lack of cold storage facilities in Viet Nam is also an area that developers should exploit. Given the keen interest from foreign manufacturers, industrial developers could also consider built-to-suit factories that deliver on the unique technical 

Conclusion

Are you looking to invest in industrial products or need industrial properties for your enterprise? Contact Savills Industrial Services for support. The team offers comprehensive consultancy services backed by the latest market research from across Viet Nam and the APAC region. Contact Thomas Rooney for more information.