The Rising Tide of Industrial Property Development in Vietnam
By Nguyen Tuong
Sun, July 31, 2022 | 5:30 pm GMT+7
As Vietnam increasingly positions itself as a prime destination for supply chain relocations, investors are pouring billions of U.S. dollars into the country’s industrial property sector. This transformation has come in the wake of the COVID-19 pandemic, urging businesses to rethink their logistics and production setups.
Foreign Investment Wave
Vietnam’s industrial landscape is witnessing a significant influx of foreign capital. Notably, GLP, Asia’s largest warehouse operator, launched its inaugural Vietnamese logistics development fund earlier this year—GLP Vietnam Development Partners I (GLP VDP I)—with an ambitious investment capacity of $1.1 billion. GLP has received backing from a diverse group of investors spanning Asia, Europe, North America, and the Middle East, including prominent pension and sovereign wealth funds, as well as insurance companies.
The focus of this fund is clear: developing modern, environmentally-friendly logistics facilities in major cities like Hanoi and Ho Chi Minh City, along with their surrounding areas. The current plan includes six seed development sites across almost 900,000 square meters.
In tandem with GLP, Singaporean firm YCH Group and Vietnam’s T&T Group are co-developing a $300 million logistics hub known as Vietnam SuperPort in Vinh Phuc province. This project is an initial phase under the ASEAN Smart Logistics Network, aimed at bolstering ASEAN connectivity. The World Bank’s investment arm, IFC, is lending support to this ambitious initiative, which is set to serve as a critical junction for global and regional trading routes linking Vietnam, China, and other ASEAN members.
Strategic Developments Across the Nation
Several other noteworthy projects are underway. Cainiao, the logistics branch of Alibaba Group, recently announced a development in Dong Nai province: the Cainiao Dong Nai Smart Logistics Park. Spanning approximately 168,000 square meters, this facility will feature around 90,000 square meters of premium warehouse space. Its advantageous location close to the upcoming Long Thanh International Airport and major seaports positions it to capitalize on industry trends.
The logistics landscape in Dong Nai further strengthens with Logos, an Australian logistics specialist, entering a joint venture with Manulife Investment Management, aiming to acquire an 11-hectare logistics asset valued at over $80 million. Their project aims to deliver 116,000 square meters of state-of-the-art logistics space.
In northern Quang Ninh province, the real estate dynamic shifts as BW Industrial Development JSC secures 74,000 square meters in the Bac Tien Phong Industrial Zone from Belgian company DEEP C Industrial Zones. BW’s CEO emphasizes the ongoing trend of investors moving to Quang Ninh as industrial parks in nearby areas reach full capacity.
Domestic Players Join the Race
Domestic companies, too, are capitalizing on this burgeoning segment of the market. The T&T Group recently obtained governmental approval for a 193-hectare industrial park in An Giang province. This will serve as the group’s inaugural project in southern Vietnam, further solidifying the national push to build a robust industrial base.
Novaland, a prominent player in Vietnam’s real estate market, is making strides too, transitioning into the industrial sector with plans for its first project set to launch in the second half of this year. As the demand for industrial properties rises, Novaland’s extensive land bank positions it well for future growth.
Market Dynamics and Rising Rents
As interest in Vietnam’s industrial properties surges, rental prices are ascending to record levels. According to Cushman & Wakefield, in the second quarter of this year, industrial land rents reached $290 per square meter in Long An and $270 in Ho Chi Minh City. Binh Duong and other provinces recorded significant upticks as well, prompting a noteworthy increase in overall market rates.
The challenge of supply versus demand is apparent, particularly in the northern regions where a shortage of industrial land is expected to drive average rents up by 5% by year-end. This anticipated rise is driven largely by the influx of foreign direct investment (FDI) companies targeting the region.
The Road Ahead
Vietnam’s favorable investment climate, characterized by a stable GDP growth rate and ongoing urban infrastructure development, positions the nation as a favorable location for logistics and industrial investments. As major manufacturers relocate operations closer to Vietnam—fueled by a need for more resilient supply chains—local authorities and developers collaborate to enhance infrastructure connectivity, ensuring that Vietnam emerges as a focal point in the global supply chain framework.
The focus on creating high-quality infrastructures, such as logistics parks and industrial zones, coupled with an ever-growing interest from both foreign and domestic investors, simulates a growth trajectory that suggests Vietnam’s industrial property sector is just beginning its ascent.