Introduction: The Industrial Real Estate Sector - A Strong Breakthrough in the Market
High occupancy rates, stable rental price growth, significant and increasing demand, along with a strong attraction of foreign direct investment (FDI), are key factors affirming that industrial real estate (IRE) continues to maintain its leading position in the Vietnamese real estate market. While other segments, such as residential real estate, are experiencing stagnation, industrial parks are emerging as a "fertile ground," attracting investors for development.
In contrast, the residential real estate market at the end of 2024 is facing stagnation due to high property prices. Even though interest rates have decreased to 4.6–9.5% per year, people remain hesitant to borrow, as their incomes are not increasing proportionally. The supply is limited, with 80% of newly launched projects in Ho Chi Minh City and Hanoi being high-end properties. Surveys also show that 50% of homebuyers expect interest rates to be below 8% per year, and most are waiting for property prices to drop. These factors have led to a reduction in transactions in Q4.
The industrial real estate sector has experienced remarkable growth, with profit growth reaching 169% year-on-year, eight times higher than the overall market growth rate of 19.5% in Q3 2024 (according to a report from MBS). The significant increase in demand for housing, services, and warehousing has made the market more vibrant than ever, creating a driving force for the rapid development of this sector.
According to a report from the Department of Economic Zones Management, Ministry of Planning and Investment, as of the end of July 2024, Vietnam has established 431 industrial parks (IPs) and export processing zones (EPZs), covering a total area of approximately 132.3 thousand hectares. This has created an industrial land fund of about 89.9 thousand hectares, of which 301 IPs are operational, attracting substantial investment capital. This has contributed significantly to the economic and social development of the country as well as various localities.
The Crucial Role of FDI in Driving Vietnam's Industrial Real Estate Development
FDI capital plays a particularly important role in driving the development of industrial real estate. As of the end of November 2024, the total newly registered, adjusted, and contributed capital from foreign investors (FDI) reached nearly 31.4 billion USD, up 1% compared to the same period in 2023. Key countries investing in Vietnam's industrial real estate include South Korea, Singapore, and Japan, with a prominent trend toward high-tech, high-value-added manufacturing. The manufacturing sector accounts for 63% of the total FDI, demonstrating Vietnam's exceptional appeal not only in low-cost production but also in advanced technology and high-value production.
The Northern and Southern economic hubs remain the primary destinations for these investment flows. The Northern region, with provinces like Bac Ninh and Hai Phong, stands out due to its strategic location near China and Northeast Asian markets, making it suitable for export-oriented manufacturing industries. The Southern region, including Ho Chi Minh City, Binh Duong, and Dong Nai, benefits from strong logistics infrastructure and a convenient port system, ideal for both export manufacturing and domestic consumption. In terms of investment locations, for the first 10 months of 2024, Bắc Ninh has attracted the highest registered FDI capital, reaching $4.4 billion USD. The Northern region accounts for the largest share of total registered capital at 57.5%, while the Southern region accounts for 27.9%. In the Southern region, provinces in the Southern Key Economic Zone (Ho Chi Minh City, Bà Rịa-Vũng Tàu, Bình Dương, Đồng Nai, Long An, etc.) remain among the top localities in attracting FDI capital nationwide. Specifically, Bà Rịa-Vũng Tàu ranks 3rd with $1.67 billion USD in registered FDI, followed by Bình Dương with $1.48 billion USD. Đồng Nai holds the 7th position with $1.2 billion USD, while Ho Chi Minh City and Long An rank 11th and 13th, with $842 million USD and $646 million USD, respectively.
Vietnam's free trade agreements (FTAs), particularly with the EU and the UK, have enhanced the attractiveness of the industrial real estate market by improving access to large markets and offering trade advantages. To date, industrial parks and economic zones in Vietnam have attracted more than 10,400 domestic investment projects and over 11,200 effective FDI projects, with total registered investment reaching 2.54 million trillion VND and 231 billion USD. FDI in industrial parks and economic zones accounts for 35-40% of the total registered FDI nationwide in recent years.
These industrial parks have created approximately 4.15 million direct jobs, mainly concentrated in the Southeast region and the Red River Delta, accounting for 41.3% and 30.3%, respectively, of the total workforce in industrial zones nationwide.
2. Industrial Real Estate Situation
a. Industrial Land
Supply of Industrial Land
Q3/2024 witnessed the launch of a new industrial park for leasing in Long An province. The Prodezi Ecological Industrial Park introduced approximately 280 hectares of leasable industrial land to the market. By the end of the first nine months of the year, the total industrial land supply in the Southern Key Economic Region reached 28,300 hectares, a 1.6% increase compared to the same period last year. According to Cushman & Wakefield, Binh Duong led in cumulative supply for the nine-month period with nearly 8,000 hectares, followed by Dong Nai and Long An. Ba Ria - Vung Tau contributed nearly 6,000 hectares, while Ho Chi Minh City recorded a more modest supply of nearly 3,000 hectares.
Industrial Real Estate Demand
In terms of demand, industrial land demand remained high in Q3/2024, driven by continuous FDI inflows into the Southern Key Economic Region. The net industrial land absorption was recorded at 108 hectares, marking a 37.2% increase compared to the previous quarter. Cumulatively, in the first nine months of 2024, net absorption reached 259 hectares. The average market-wide occupancy rate remained stable at 89%. Manufacturers are increasingly expanding to markets such as Long An and Ba Ria - Vung Tau, where industrial land remains relatively abundant and rental prices are more competitive compared to other Tier-1 markets.
While electronics manufacturers dominated industrial land investment in the North, the South saw diverse demand across multiple industries, ranging from high-value sectors such as electronics and pharmaceuticals to traditional sectors like plastics, vehicle manufacturing, and animal feed production. The majority of industrial land tenants this quarter came from industries such as machinery & equipment, plastics, and pharmaceuticals.
The average primary rental price for industrial land was recorded at 176 USD/m²/lease term, stable quarter-over-quarter but up 5.6% year-over-year. Notably, Ho Chi Minh City remained the area with the highest rental prices, ranging from 250-300 USD/m².
Outlook
As of Q3/2024, all four major industrial provinces in the Southern Key Economic Region — Binh Duong, Dong Nai, Ba Ria - Vung Tau, and Long An — have announced their 2021-2030 Master Plans, approved by the Prime Minister. These provinces are expected to introduce nearly 6,000 hectares of new industrial land between now and 2027, with a compound annual growth rate (CAGR) of approximately 5.9% during the 2024-2027 period. Most of the new supply will come from developers converting rubber plantation land into industrial land in Binh Duong, Dong Nai, Binh Phuoc, and Ba Ria - Vung Tau. Rental prices are expected to continue rising, driven by positive market trends.
Prominent Upcoming Projects (2024 - 2027):
Project | Location | Scale (ha) | Investor | Total Investment (billion VND) | Expected Implementation Year |
Long Duc 3 Industrial Park | Dong Nai | 244 | Long Duc 3 Industrial Park JSC | 1,800 | 2025 |
Loc Giang Industrial Park | Long An | 466 | KBC | 5,198 | 2025-2027 |
Strong increase in demand for modern warehousing and industrial space
With the growth of e-commerce and rising FDI, the demand for warehousing and ready-built industrial spaces has surged significantly. In 2024, the supply of ready-built factories and warehouses (RB) increased by 31%, with occupancy rates exceeding 80% in key economic areas. The Southern Key Economic Region, with its logistics advantages, is favored for its competitive costs and strategic location, serving both domestic and international clients. Warehousing costs in Vietnam remain attractive, averaging 5.6 USD/m², which appeals to companies adopting the "China +1" strategy. Developers are meeting this strong demand with modern, high-tech facilities, including environmentally friendly options that meet international standards.
b. Ready-Built Factories (RBF)
Supply:
As of the first nine months of 2024, the total RBF supply in the five provinces of the Southern Key Economic Region reached 6.3 million m², a 16.8% increase compared to the same period last year. Dong Nai and Binh Duong lead the market with a supply of 2.5 million m² each.
Demand:
In Q3/2024, the net absorption of RBF reached 245,000 m², a 43% increase quarter-over-quarter and double compared to the same period last year. Binh Duong accounted for 65% of the total absorption, followed by Dong Nai (27%). The average rental price reached 4.8 USD/m²/month, a slight 0.3% increase compared to the previous quarter. It is forecasted that the shift from RBW (ready-built warehouses) to RBF will continue, driving supply growth from 2024-2027 at a CAGR of 4.5%.
c. Ready-Built Warehouses (RBW)
Demand:
In Q3/2024, the net absorption of RBW reached 79,000 m², a 6.7% increase compared to the previous quarter. Dong Nai led the demand (59%), followed by Ho Chi Minh City (18%) and Binh Duong (15%). The average rental price was 4.5 USD/m²/month, lower than the Northern region at 4.9 USD/m²/month.
Outlook:
From now until 2027, RBW supply is expected to reach 1.9 million m². However, to adapt to market conditions, developers may consider converting their projects from ready-built warehouses to ready-built factories and offering competitive programs to attract tenants.
The industrial real estate (IRE) sector is witnessing robust growth and continues to maintain its leading position in Vietnam's real estate market. While other real estate segments, such as residential, face stagnation, industrial real estate remains a fertile ground attracting investors due to high occupancy rates, strong demand for land, and stable FDI inflows. The development of industries, particularly high-tech manufacturing, along with the strategic location and infrastructure advantages of industrial zones, has been a critical driver of this sector's continued growth.
These positive factors, combined with foreign investment inflows and free trade agreements (FTAs), will continue to drive the sustainable development of industrial real estate in the future, creating attractive investment opportunities for businesses and investors.
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