Expansive Opportunities for Industrial Real Estate Development

3:48:24 PM | 6/10/2024

Vietnam’s industrial real estate sector is experiencing strong expansion, driven by favorable elements such as macroeconomic stability, industrial advancement and enhancements in transportation infrastructure.improvement.

High occupancy rate

The growing demand for industrial real estate results in a high occupancy ratio in industrial parks (IPs), over 75%, especially in major northern provinces (82%) and southern provinces (92%).

Vietnam’s industrial real estate market is expected to grow robustly and draw many investors

According to research data from the Vietnam Association of Realtors (VARS), by the end of the first quarter of 2024, the country had 418 industrial parks, including four export processing zones (EPZs), established in 61 out of 63 provinces and cities with a total land area of  129,900 ha, of which rentable industrial land was 89,200 ha. Up to 371 IPs lie outside economic zones (EZs), 39 are inside coastal EZs and eight are located in border gate EZs.

Particularly, IPs and EZs have attracted over 10,400 domestic direct investment (DDI) projects and over 11,200 valid foreign direct investment (FDI) projects, with total registered investment capital of over VND2,540 trillion (US$111 billion) and US$231 billion, respectively. FDI capital in IPs and EZs accounted for about 35-40% of the total added FDI fund in the country in recent years.

By 2023, IPs and EZs have created full-time jobs for about 4.15 million workers, of which the Southeast region and the northern Red River Delta regions accounted for 41.3% and 30.3%, respectively.

Especially, high demand, and escalating, is pushing up land rents in IPs by 8-12% annually. The Northern region has witnessed the strongest increase to an average rental price of US$135 per square meter in the rental period. In the south, the average rental is US$188.

In addition to the demand for factories and warehouses, the industrial real estate market has seen strong demand growth of ready-built warehouses and factories for rent, especially in manufacturing, e-commerce, machinery, electronic component industries. Rental prices of ready-built warehouses and factories range from US$4-5 per square meter per month, with the highest prices in Bac Ninh province (US$4.5-5.6) and Hai Phong City.

Many opportunities

Vietnam's industrial real estate market is forecast to extend robust growth in the coming years and attract many domestic and foreign investors. Industrial real estate giants are actively developing modern industrial parks and applying environmentally friendly advanced technologies to meet more demanding requirements of tenants.

According to VARS, Vietnam's industrial real estate market still has much room for future growth, promises to extend strong development momentum and plays a key role in Vietnam's economy. In particular, the expected logistics development will lead to a strongly growing demand for warehouses and logistics centers, especially when e-commerce explodes. Domestic and foreign logistics businesses have also been actively expanding the scale and scope of operations in Vietnam.

In particular, industrial real estate giants have also quickly captured opportunities by researching and developing modern IPs, applying high technology and automation to production to improve productivity and product quality while reducing costs and sharpening competitiveness in the international market.

On the other hand, eco-industrial parks are also being encouraged. These IPs not only minimize adverse impacts on the environment but also attract the attention of investors seeking sustainability in business operations.

Regarding long-term development solutions for industrial real estate, according to VARS, the government needs to further promote investment and upgrade transportation infrastructure, logistics infrastructure and industrial utilities to support industrial real estate development. At the same time, it needs to reform administrative procedures and provide a more favorable investment environment for businesses.

To make the most of the remaining 15 years of the golden population period, VARS proposes investment solutions to education and vocational training, especially in high-tech and automation, to improve the quality of human resources.

Logistics development will further boost the demand for warehouses and logistics centers, especially when e-commerce booms. Domestic and foreign logistics firms are also actively expanding their scale of operations in Vietnam. To take advantage of this opportunity, VARS suggested adopting attractive and stable incentive policies to attract foreign investment while strengthening international cooperation to learn and apply successful development models.

Huong Giang (Vietnam Business Forum)