Vietnam industrial real estate attracts large FDI inflows in H1, 2022

The industrial real estate market in Vietnam has flourished after the COVID-19 epidemic, with a series of new industrial park investment projects approved for investment and high occupancy rates in the north and south areas.

Investment in industrial real estate increased sharply with the return of FDI flow after Covid-19, with a large key stakeholder emerging recently.

Foreign direct investment (FDI) into Vietnam has been booming this year after the country returned to a new normal. In the first half of 2022, there were 487 projects registered to adjust their investment capital (up 5,9% over the same period), and the total additional registered capital reached nearly $6.82 billion (up 65,6% over the same period). Among them, real estate ranked second, with investments reaching $USD 3.15 billion, accounting for 22,5% of the total registered FDI.

Along with the return of post-pandemic FDI inflow, investment in industrial real estate has also shown many positive signals. The cause of the increase in investment projects in industrial real estate mainly comes from the impact of the Covid-19 epidemic and the Russia-Ukraine conflict, along with the increase of new manufacturing FDI into Vietnam, as well as the need to expand domestic production coming from both existing foreign investors that are expanding production and domestic enterprises.

Numerous industrial park and warehouse projects have been launched in different localities, highlighting the appeal of this piece of cake.

For example, Vietnam-Singapore Industrial Park (VSIP) has launched many large projects in Binh Duong and Hai Phong with increasing scale. Situated within the bustling epicenter of Binh Duong New City, the 1,000-hectare VSIP III is expected by the Government and its investor to be a driver of industrial development in the country.  Other major investors in industrial real estate projects in Vietnam recently include LOGOS Vietnam Logistics Venture, CapitaLand Development, BW Industrial Development, and Indochina Capital.

Rents and occupancy rates have increased sharply due to high demand, with occupancy rates in the northern and southern industrial zones remaining high. While this proportion of industrial zones in the north remained at 80% in the second quarter of 2022, this figure in the south was 85%.

Thanks to the positive occupancy rate, the average land rent recorded a growth of 5-12% in the main industrial cities compared to the same period last year, possibly even up to 20% in some projects. 

Vietnam's industrial real estate will have a large supply in the future

Due to high demand and great potential, the planning of industrial land banks is of special interest to the Vietnamese government. The setting of a target of 205,800 hectares of land for industrial parks for 2030, an increase of about 115,000 hectares from 2020, is one of the noteworthy components of the National Land Use Plan for the period of 2021– 2030 with a vision to 2050, reported to the National Assembly by the Ministry of Natural Resources and Environment. 

Industrial real estate is still concentrated in areas adjacent to large urban areas such as Hanoi and Ho Chi Minh City, places with convenient connections to the airport and port. This has made the supply in these areas very scarce. FDI capital into the manufacturing sector will be spread evenly across localities across the country. The Vietnamese government has paid attention to the planning of real estate land funds in many other localities. Deputy Prime Minister Le Van Thanh has just signed three consecutive decisions on investment policy for industrial park projects, investment in construction, and the business of industrial park infrastructure in Long An, Thanh Hoa, and Danang, with a total scale of 3 industrial parks up to 1,264 hectares.

Additionally, the recently issued Decree No. 35/2022/ND-CP has provided a number of innovations in the management policy for industrial parks and economic zones, which experts anticipate will create a favorable policy corridor and encourage more investment in the industrial real estate market. 

Decree 35 abolished regulations on making, adjusting, supplementing, and approving the development planning of industrial parks. Concurrently, the Government added provisions on the development plan of industrial parks in Article 4 of this Decree.

With the provisions of Clause 7, Article 7 of Decree 35, Provincial People's Committees were also given a partial right to adjust the location and size of the area for the construction planning of industrial parks. This will contribute to the proactive management of localities and withdrawing the steps of adjustment procedures when not having to push the dossier to the Central Authority for decision.

With the inclusion of incentive policies in Chapter III of Decree 35, the Government also strengthened the development promotion for new types of industrial parks, such as high-tech industrial parks and free-trade zones in export processing zones.

Vietnam will remain one of the best investment destinations for industrial real estate in Southeast Asia for the next 10 years and beyond. With the nation’s economic growth, accompanied by the boom in modern retail trends like e-commerce and waves of foreign investment in manufacturing facilities in Vietnam, demand for high-quality industrial property will continue to rise. Reach out to Viettonkin right away to receive the most recent multidimensional news and thorough market analysis.