In this article, we will explore the reasons behind the rise of industrial real estate in Viet Nam and uncover the lucrative opportunities that await investors. From the Government's infrastructure development initiatives to current market trends, we will delve into the factors driving industrial growth and how your business can benefit from investing in Viet Nam. We explore how you can unlock lucrative opportunities in Viet Nam, one of Southeast Asia's fastest growing economies.
What is Driving Industrial Growth in Viet Nam?
Viet Nam, with its rapidly growing economy and favourable investment climate, has emerged as a preeminent location for industrial real estate development in Southeast Asia. Foreign investors are keen to capitalise on the country's booming manufacturing and export sectors with lucrative opportunities abound. By 20 June 2023, foreign direct investment (FDI) reached US$13.4 billion, of which, manufacturing and processing delivered US$8.5 billion.
With its strategic location and access to key shipping routes, Viet Nam offers a compelling proposition for investors seeking to establish a foothold in the region. The Government's pro-business policies and incentives appeal to foreign investment, and Viet Nam attracts significant multinational companies looking for industrial properties and opportunities across diverse sectors from electronics (Samsung and Apple) and F&B (Coca-Cola) to plastic toys (LEGO). Large multinational corporations establishing themselves in Viet Nam has also driven an increase in small and medium-sized enterprises (SMEs) as these businesses act as supporting industries to larger producers.
Other factors like China +1 strategies have driven the diversification and relocation of multinational manufacturers outside of China, which means businesses are seizing the potential of Viet Nam's industrial real estate market to expand their operations.
Overview of Viet Nam’s Growing Economy
Viet Nam’s economy is on a steady upward trajectory, fuelled by favourable demographics, rising middle-class consumption, and increasing urbanisation. As one of the fastest-growing economies in the region, Viet Nam has become an attractive destination for foreign investors looking to tap into the vast potential of its industrial market. Viet Nam is forecast to post the highest GDP growth of ASEAN countries in 2023 at 5.8%, marginally higher than the Philippines at 5.7%, but notably higher than Singapore’s 1%.
ASEAN Real GDP YOY Growth
With a population of nearly 100 million, a young workforce, and growing middle and consuming classes This is positive for investors looking to tap into a growing and increasing consumer base, but also those looking for a secure and affordable labour force.
The country's strategic location and access to key shipping routes also make it an ideal hub for manufacturing and logistics activities. As a result, multinational corporations and small and medium-sized enterprises are increasingly setting up operations in Viet Nam to cater to both the domestic and export markets.
Factors Driving the Rise of Industrial Real Estate in Viet Nam
Several factors contribute to the continued success of industrial real estate in Viet Nam. Firstly, infrastructure development initiatives play a crucial role in attracting investment. The Government actively invests in the construction of roads, ports, airports, and industrial parks. However, although transportation infrastructure is expanding rapidly, development falls short of national economic and social growth and regional peers. Continued and increased investment will be essential.
Northern Viet Nam Infrastructure
Southern Viet Nam Infrastructure
Secondly, Viet Nam's membership in various free trade agreements (FTAs), such as the Europe-Viet Nam Free Trade Agreement (EVFTA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) spurs international business success. Viet Nam has 15 existing FTAs and is negotiating three more; these agreements have opened significant business opportunities, reduced trade barriers and increased market access, making Viet Nam an attractive destination for manufacturing and export-oriented industries.
Viet Nam free trade agreement (FTA) summary, 2023
Read more about Viet Nam’s FTAs and how EVFTA is paying dividends in Industrial Insider 8M/2023.
Affordable labour costs in Viet Nam also make it a cost-effective option for businesses. Compared to other countries in the region, Viet Nam offers competitive manufacturing salaries at US$329/month, which is an attractive investment proposition for companies looking to optimise their operational costs.
APAC manufacturing salaries, 2019 - 2023 US$/month
Key Industrial Real Estate Hubs in Viet Nam
Viet Nam has several key industrial real estate hubs that offer unique advantages for businesses. Our analysis in Industrial Insider 8M/2023 explores the Northern Economic Zone (NEZ) and the Southern Economic Zone (SEZ). They are considered the country's economic powerhouses with well-developed infrastructure networks, including ports, airports, and industrial parks, ideal for logistics and manufacturing activities.
The NEZ includes provinces like Ha Noi, Bac Ninh, Bac Giang, Hung Yen, Vinh Phuc, Hai Phong, and Hai Duong. It has a focus on heavy industry, electronics, automotive and large-scale projects. Key developers include Vietnam Singapore Industrial Park (VSIP), Viglacera, Kinh Bach City Corporation, TNI Holdings Limited, and Deep C Industrial Zones. Notable industrial occupiers in Northern Viet Nam include Samsung, LG Electronics, Foxconn, Canon, Hyundai, Honda, and Vinfast, representing industries like electronics & computers, automotive, machinery & equipment, and solar-related manufacturing.
NEZ IP Map
Download Industrial Insider 8M/2023 for insights on industrial land supply, projects, occupancy, and rent in Northern Viet Nam. LINK
The SEZ includes provinces like Ho Chi Minh City, Binh Duong, Dong Nai, Long An, Tay Ninh, and Ba Ria – Vung Tau (BRVT). Key industrial developers in Southern Viet Nam include Vietnam Singapore Industrial Park (VSIP), Sonadezi, Saigon VRG, Tin Nghia Corporation, Idico, and ITA with tenants such as LEGO, Suntory PepsiCo, Intel, Jabil, P&G, Unilever, Coca-Cola, CJ Group, and Kumho Tires. Key industries in Southern Viet Nam differ from the North and include food & beverage processing, building materials, textiles & apparel, and rubber & plastic products.
SEZ IP Map
Download Industrial Insider 8M/2023 for insights on industrial land supply, projects, occupancy, and rent in Southern Viet Nam. Link
Investment Opportunities in Viet Nam’s Industrial Sector
The rise of industrial real estate in Viet Nam presents a multitude of investment opportunities for both domestic and foreign investors.
One of the key investment opportunities in Viet Nam lies in the development of logistics centres. With the growth of e-commerce and global trade, the demand for efficient logistics solutions is on the rise. As the country's manufacturing sector continues to grow, e-commerce expands, and customer tastes become more sophisticated, the need for storage and distribution facilities rises. Although Viet Nam is one of the fastest-growing countries in terms of logistics services, fragmentation and decentralisation remain hindrances.
Additionally, data centres are presenting interesting investment options in Viet Nam. Hyperscalers announcing interest in Viet Nam. In August 2022, Amazon Web Services (AWS) announced the launch of edge data centres in Ha Noi and Ho Chi Minh City.
Government Policies and Incentives for Foreign Investors in Viet Nam
The Vietnamese Government has implemented various policies and incentives to attract foreign investors to the industrial real estate sector. Investment pull factors include tax incentives, land lease incentives, and streamlined administrative procedures for businesses operating in industrial parks and export processing zones.
Challenges When Investing in Industrial Real Estate
While Viet Nam offers promising investment opportunities in the industrial real estate market, there are also challenges and risks that investors should be aware of. Obtaining accurate and reliable information about available properties and market trends can be a challenge, especially for foreign investors. Additionally, regulatory and legal complexities can also pose challenges. Understanding the local laws and regulations governing industrial real estate transactions is crucial to ensure compliance and mitigate legal risks.
Tips for Investing in Industrial real Estate in Vietnam
When considering investing in industrial real estate in Viet Nam, there are several tips and best practices to keep in mind. Conducting thorough market research and due diligence is crucial to understand the market dynamics, demand-supply balance, and potential risks. Engaging the services of local real estate experts and legal advisors can provide valuable insights and ensure a smooth investment process.
Building strong relationships with local partners and stakeholders is essential for successful investment in Viet Nam. Local partners can provide valuable market knowledge, contacts, and support in navigating the local business landscape.
Conclusion: The Future of Industrial Real Estate in Viet Nam and its potential for investors.
As Viet Nam's economy continues to grow, the future of industrial real estate is promising. Infrastructure development, a favourable investment climate, and strategic location position Viet Nam as an attractive investment destination in Southeast Asia.
For investors looking to unlock lucrative opportunities in Southeast Asia's growing economy, industrial real estate in Viet Nam offers a compelling proposition. With the right market knowledge, due diligence, and strategic investments, businesses can capitalise on Viet Nam's industrial real estate market.
So, whether you are a multinational corporation looking to expand your operations or a small and medium-sized enterprise seeking growth opportunities, consider exploring industrial real estate opportunities in Viet Nam. Contact John Campbell, Associate Director and Head of Industrial Services for more information.
Looking for data on Viet Nam’s industrial market? Download Industrial Insider 8M/2023