The Resilient Landscape of Industrial Real Estate in Vietnam

According to the recent report from real estate consultancy firm CBRE, the occupancy rates in Vietnam’s tier-1 industrial real estate markets remained robust in the fourth quarter of 2023. This positive indicator highlights not only the recovery from earlier economic setbacks but also the resilience and strategic growth of the industrial sector in both the northern and southern regions of the country.

Occupancy Rates and Market Demand

Manufacturers from diverse industries continue to expand their operations across Vietnam, with the northern and southern regions showing occupancy rates of 81% and 92%, respectively. This increase is a reflection of the sustained demand for industrial spaces, driven by local and foreign investments. The absorption area in the northern market has recently surged beyond 800 hectares, marking a significant 37% year-on-year growth. However, the southern market has faced challenges, with a 32% decrease in absorption area due to limited available land, settling at 500 hectares.

Supply Surge in Ready-Built Warehouses and Factories

This year has been particularly lively for the ready-built warehouse and factory market. The northern region experienced record levels of new supply, with 770,000 square meters becoming available. The southern region reported similar figures but maintained a stable occupancy rate, with 86% in the north and 85% in the south. Interestingly, the second half of 2023 saw a notable boost in absorption in the southern region—3.8 times higher than the first half—thanks in part to favorable policy shifts aimed at attracting investment.

Emerging Industries Driving Future Growth

The semiconductor and electric vehicle sectors have taken center stage in 2023, capturing the attention of many local businesses aiming for high-tech and sustainable development. This trend signifies a shift towards advanced manufacturing, which is expected to significantly drive future demand for industrial space.

Spotlight on DEEP C Industrial Zones

DEEP C Industrial Zones, founded by a Belgian investor, have emerged as a pivotal player in Vietnam’s industrial real estate landscape. The zones, located in Haiphong and expanded into the Quang Ninh province, present a reliable investment opportunity. Bruno Jaspaert, the general director of DEEP C, emphasizes the favorable investment climate in the northern region, highlighting its tremendous growth potential.

While the southern market is undeniably attractive, Jaspaert notes the growing limitations in available space and higher living costs. This is prompting investors to reconsider their options in light of infrastructure quality and proximity to supply chains.

Noteworthy Projects and Investments

In 2023, DEEP C attracted 21 new projects amounting to a staggering $970 million. Many of these investments are in the vehicle manufacturing and renewable energy sectors. Notable projects include:

• Boltun: Specializing in lightweight alloy screws and bolts for electric vehicles.
• Sunrise Group: Manufacturing steel and aluminum wheel rims.
• TENOWO GmbH: Producing technical nonwoven fabrics for the automotive sector.
• Shilla Corporation: Leading production of components for wind turbines.

The Role of Major Corporations

Significant interest also comes from industry giants like South Korea’s SK Group, which has invested $500 million in the ECOVANCE high-tech biodegradable materials project at DEEP C Haiphong I.

Recent inaugurations at DEEP C include the $18.5 million POSCO Vietnam Processing Centre, focusing on diverse materials like steel, aluminum, and zinc. This underscores the area’s continuous growth and adaptability to various industrial demands.

Focus on Sustainability and Future Trends

Elmar Wind, chairman of TENOWO Haiphong Co., Ltd, emphasized the strategic significance of Haiphong as a manufacturing base, contributing positively to both local and national manufacturing sectors. The shift toward sustainable practices is increasingly capturing the interest of foreign investors who are now considering carbon taxes and the demand for green industrial real estate. This trend is expected to escalate alongside land scarcity, which will naturally elevate rental prices, impacting the future landscape of industrial real estate in Vietnam.

Overall, the industrial real estate sector in Vietnam is undergoing a transformative phase characterized by strong occupancy rates, increased supply, and a strategic shift toward high-tech and sustainable industries. Each region brings its unique advantages, indicating a vibrant and competitive landscape for domestic and international investors.