Vietnam’s Economic Landscape in 2022: A Year of Growth Amidst Challenges

Remarkable GDP Growth

In 2022, Vietnam’s economic performance exceeded expectations, achieving a GDP growth rate of 8.02%. This remarkable figure not only surpassed the forecasts of numerous international economic organizations, which anticipated growth rates between 6.5% and 7.5%, but also marked the highest increase during the decade from 2011 to 2022. This surge reflects a robust recovery following the disruptions caused by the COVID-19 pandemic. Furthermore, the GDP per capita rose to approximately 95.6 million VND (around US$4,110), showing an increase of US$393 from 2021.

Stable Consumer Price Index

Despite the rapid growth, Vietnam managed to keep its consumer price index (CPI) under control, with an inflation rate of 3.15%. This figure remains comfortably below the 4% target set by the National Assembly, indicating that the government has been effective in managing inflationary pressures while promoting economic growth.

Foreign Direct Investment (FDI) Trends

The trend in Foreign Direct Investment (FDI) has been particularly encouraging. In 2022, realized FDI capital reached a five-year high of US$22.4 billion, reflecting a 13.5% increase from the previous year. The manufacturing and processing sector attracted the majority of this investment, accounting for 61%, while the real estate sector followed with 16%, alongside technology and electricity, which made up the remaining 23%. Major investors included countries like Singapore (23.3%), South Korea (17.6%), and Japan (17.3%).

Interest Rate Changes and Economic Stability

In the global economic landscape, the US Federal Reserve (FED) implemented a series of interest rate hikes throughout 2022, raising rates to between 4.25% and 4.5%. Analysts predict further increases in 2023, possibly reaching 5.1%. However, Vietnam’s domestic exchange rates and interest rates demonstrated resilience, showing minimal fluctuations and even a slight downward trend thanks to timely government interventions.

Industrial Real Estate Market Insights

The industrial real estate market in Southern Vietnam experienced mixed outcomes in the last quarter of 2022. Cushman & Wakefield reported a consistent rise in rental prices across all segments, yet noted a decline in occupancy rates. This decline can be attributed to a substantial increase in new supply entering the market, which slightly dampened demand for ready-built warehouses and factories.

Industrial Park Land and Rental Trends

Industrial park land for lease reached 28,170 hectares, marking a 1% increase over the previous quarter and a 12% increase year-on-year. The occupancy rate remained stable at nearly 81%, despite a 5-percentage-point drop compared to last year. Rental prices averaged US$159 per sqm per lease cycle, up 3% quarter-on-quarter and 10% year-on-year.

Ready-Built Factories and Warehouses

Regarding ready-built factories, the supply expanded to approximately 4.82 million sqm, reflecting an 11% increase quarter-on-quarter and 17% year-on-year. However, the occupancy rate saw a slight decline, dropping to nearly 80%. Rent levels remained stable at around US$4.6 per sqm per month.

The ready-built warehouse segment experienced a remarkable growth trajectory, with an increase of 9% quarter-on-quarter and an impressive 39% year-on-year, reaching a total of about 5 million sqm. The occupancy rate, however, fell to 76%, with rental prices increasing by 1% quarter-on-quarter and 10% year-on-year to reach US$4.4 per sqm per month.

Future Projections and Market Pressures

Looking ahead, the market is expected to receive an abundance of warehouse supply, even as the availability of industrial land may become constrained due to extended legal processes. This influx of new supply could exert downward pressure on warehouse rents, potentially keeping future rental prices stable or even leading to reductions.

Changing Investor Preferences

As land prices continue to rise, investors are showing increased interest in regions with more attractive pricing, such as Binh Phuoc, Binh Thuan, and Can Tho. Cushman & Wakefield anticipates that the upcoming supply of industrial zones will include about 27,000 hectares, alongside 4.1 million sqm of ready-built factories and 2.8 million sqm of ready-built warehouses.

Demand for Enhanced Facilities

In the last quarter, robust rental demand was observed from businesses, with requests for spaces ranging from 20,000 to 50,000 sqm. Alongside location and price, there is a noticeable shift in focus toward technical standards, facility improvements, and environmental sustainability—aligning with global trends aimed at achieving Net Zero and adopting renewable energy sources.

The economic indicators and trends outlined above depict a dynamic landscape for Vietnam, characterized by impressive growth alongside challenges that require astute management and strategic planning for continued success in the coming years.