Vietnam industrial property picture sees contrasting colors

While northern Vietnam’s industrial real estate market attracts investors in fields with high added value such as electronics, computers, automobiles, machinery and equipment, the south region is a magnet for rubber, plastics, food, beverage, construction materials and garment businesses.

According to real estate services firm Savills Vietnam, in the first half of 2023, the North attracted the greatest manufacturing FDI at $3.4 billion, equal to a 63% share of newly registered manufacturing FDI with 238 new projects.

For investment industries, in H1/2023, electrical equipment had the greatest newly registered manufacturing FDI with a 21% share valued at $1.14 billion. Computers, electromagnetic, and electrical products had a 20% share of the investment capital, followed by rubber and plastics with a 15% share. 

In the Northern Economic Zone (NEZ), Savills Vietnam said computers, electronics, and electrical products attracted the most newly registered FDI with a 19% share of the zone's total investment capital. Electrical equipment followed with a 15% share, rubber and plastic products 5%, and motor vehicles 4%.

Meanwhile, in the Southern Economic Zone (SEZ), rubber and plastic products had the greatest manufacturing investment with a 10% share, followed by metal components with 4, and beverages at 3%. 

Solar-related manufacturers are moving to the North, comprising three of the top five manufacturing projects in the NEZ in 2022. The NEZ is home to 77% of the 30 manufacturers of solar energy products, while the SEZ has a 23% share. 

Trina Solar Co., Ltd., a leading provider of photovoltaic modules and smart energy solutions from China, has the most substantial investment with a $275 million project in Yen Binh Industrial Park, Thai Nguyen province.

Investors are largely from mainland China, Hong Kong and Singapore. However, American solar module manufacturer Thornava Solar commenced manufacturing in H1/2023 at a modern facility in Que Vo Industrial Park, Bac Ninh province with an annual capacity of 1 gigawatt.

In 2023, AD Green, a private Vietnamese enterprise, inaugurated a $45 million facility offering a 3-gigawatt solar panel production space, catering to domestic and international clients. The 8-hectare facility is in An Ninh Industrial Cluster, Tien Hai district, Thai Binh province. 

According to Thomas Rooney, senior manager of industrial consulting services at Savills Hanoi, the NEZ is home to tenants in high-value-added sectors, such as automotive, machinery and equipment, and electronics and computers. Leading corporations include Samsung, LG Electronics, Foxconn, Canon, Hyundai, Honda, and Vinfast. Primary tenants in the SEZ are diverse in sectors like rubber and plastics, food and beverages, construction materials, and garments.

He explained that the NEZ has a strategic location with access to local and international markets. It also has infrastructure with highways and three major ports, including Hai Phong Port and Lach Huyen Deep Water Port in Hai Phong city, and Cai Lan Port in neighboring Quang Ninh province.

Large-scale projects involving machinery or solar products require large land banks, he said, noting this puts the NEZ at an advantage because it has more available land banks and more affordable land prices.

According to Savills Vietnam, in 2023, there were 397 established industrial parks across Vietnam with a total area of 122,900 ha. Of these, 292 are operational with a total area of over 87,100 ha. Another 106 industrial parks are under construction with a total area of 35,700 ha. 

Industrial parks nationwide have a high occupancy rate of over 80%, with the key northern provinces reaching 83% and key southern provinces reaching 91%. 

The NEZ has a total leasable area of 12,000 ha with 68 industrial parks. The land price increased by 30% year-on-year and averaged $138 per square meter per one-off term. Tenants in the NEZ comprise enterprises in electronics & computers, automotive, machinery & equipment, and solar-related manufacturing. Notable occupiers include Samsung, LG Electronics, Canon, Hyundai, Honda and Vinfast.

The NEZ has a highly developed road network, which enhances connectivity between Ha Noi and pivotal industrial provinces such as Bac Ninh, Hung Yen, Bac Giang, Hai Duong, Hai Phong, and Quang Ninh. The region has three primary ports, Hai Phong Port, Lach Huyen Deep Sea Port, and Cat Lai Port, which underpin industrial competitiveness with links to international markets, particularly South Korea, China, and Taiwan.

The SEZ has 122 industrial parks with a total leasable area of 24,883 ha. The land price rose by 15% year-on-year and averaged $174 per square meter per one-off term. Tenants in the SEZ include those producing rubber and plastic products, food and beverages, building materials, and textiles and apparel. Notable occupiers include LEGO, Suntory PepsiCo, Intel, Unilever, Coca-Cola and Kumho Tires. 

Data from the Ministry of Construction showed that in the third quarter, the industrial real estate market welcomed new supplies from newly-launched projects.

They included Vietnam-Singapore Industrial Park II (VSIP II) covering 500 hectares in the cental province of Nghe An; 900-hectare VSIP in the Mekong Delta city of Can Tho (VSIP Can Tho); 28.2-hectare VSIP Bac Ninh II and 250-hectare Gia Binh II Industrial Park in the northern province of Bac Ninh; and 410-hectare Long Thanh High-tech Industrial Park in the southern province of Dong Nai.

The processing and manufacturing industry continued to take the lead in FDI attraction in the first nine months of 2023 with over $14 billion, accounting for nearly 69.3% of the country’s total registered investment capital and representing a year-on-year increase of 15.5%.

At the same time, multinational corporations’ shift of investment capital flows to Vietnam in recent times has resulted in a positive growth in the demand for industrial park real estate in 2023. The northern region has seen high demand from enterprises in the electronics sector, while southern Vietnam has lured automobile, garment-textile, and packaging producers.

The Ministry of Construction said that rental demand and rental capacity for industrial real estate in Q3 had increased slightly compared to Q2. In particular, the occupancy rate of industrial parks in both regions reached 85-90%. Industrial land transactions increased about 5.9% compared to the previous quarter. The nine-month figure was 20% higher than the whole of 2022.

The average industrial land rental price in Q3 was basically stable, at about $189 per square meter per one-off term in the South, up 1% from the previous quarter and 13% higher than the same period last year. The market recorded big transactions from Chinese and Japanese businesses operating in a variety of industries such as mechanics, chemicals, plastics, rubber, and electronics.

Source: The Investor