Illustration photo.
Vietnam’s industrial real estate market is witnessing robust growth. The exchange rate between the VND and USD remains stable compared to other countries in the region, along with corporate income tax (CIT) incentives, giving Vietnam an edge over competitors such as Malaysia and Indonesia.
The Vietnamese government continuously introduces new CIT incentives to maintain this advantage. According to the General Statistics Office, in 2023, Vietnam achieved an impressive GDP growth rate of approximately 5.1%, outpacing the 2.87% and 2.55% growth rates in 2020 and 2021, respectively. This places Vietnam second in the region, on par with Indonesia, and only behind the Philippines.
Data from the Asian Development Bank in 2024 shows that Vietnam’s workforce has an average age of over 32, indicating future growth potential. Additionally, manufacturing workers in Vietnam earn lower wages compared to most other Southeast Asian countries, except for Indonesia. This positions Vietnam favorably for attracting foreign investors, especially businesses seeking low-cost production locations to optimize profits.
Nonetheless, Vietnam has shifted its focus from low-value-added industries to attracting high-value-added manufacturing, thereby solidifying its position as an emerging market in the region. Vietnam consistently showcases its competitiveness by transitioning from an agriculture-based economy to one focused on exports, particularly in electronics and processing.
According to a report from the Ministry of Planning and Investment, total registered foreign direct investment (FDI) into Vietnam in recent years reveals that the manufacturing and processing sector accounts for over 70% of total FDI, reflecting investors’ priority in this field.
Mr. Thomas Rooney, Senior Manager, Industrial Real Estate Division, Savills Hanoi, commented: “The concentration of FDI in the manufacturing and processing sector brings not only direct economic benefits but also creates a spillover effect, boosting the development of ancillary industries and related services.”
Major technology corporations such as Samsung, LG, Intel, and Foxconn have played a significant role in establishing Vietnam as a regional electronics manufacturing hub. Recently, Foxconn’s total investment in Vietnam has been raised to $1.5 billion with a project in Bac Giang for phone assembly and processing. This also reflects the trend of investing in high-value-added sectors in the northern region.
Vietnam’s geographic location is advantageous for manufacturing development. Mr. Thomas Rooney analyzed: “Situated in the heart of the Asia-Pacific region, Vietnam is an ideal destination for import and export activities. There is a significant shift of manufacturing from China to Vietnam, not only from Chinese enterprises but also from American and European businesses that have long been present in China and are now seeking to diversify or withdraw completely.”
Northern Vietnam – The Shining Star of Industrial Real Estate
In Northern Vietnam, key provinces such as Bac Ninh, Hai Phong, and Thai Nguyen are becoming top destinations for FDI projects in the manufacturing sector. Bac Ninh, with its proximity to Hanoi and developed infrastructure, has attracted large-scale projects from multinational corporations.
In the south, Binh Duong has also emerged as an important industrial hub, hosting many FDI enterprises in manufacturing and processing. However, the north surpasses the south in terms of the number and scale of new projects due to advantages in cost, transportation infrastructure, and more.
Northern Vietnam boasts competitive industrial land prices, with an average of approximately $138 per square meter, 20% lower than in the south. Specifically, in the south, strategic locations in Tier 1 areas like Binh Duong or Ho Chi Minh City can command prices up to $300 per square meter. In contrast, Tier 1 areas in the north, such as Bac Ninh, average only $180 per square meter.
The north’s infrastructure is assessed to be more developed, with 10 completed expressways and four more under construction. In comparison, the south has approximately seven expressways.
At the recent “Industrial Development Context in Hanoi and the North” event in Hanoi, Ms. Pham Thi Thu Trang, Senior Manager, Industrial Business Development Division at Core5 – Indochina Kajima, shared: “In Vietnam, road transport is still the primary mode of transportation, so smooth travel between production areas and consumer markets helps businesses optimize logistics costs. Especially, the expressways connecting industrial parks with Hanoi and the Chinese border further enhance the north’s appeal to foreign investors.”
Ms. Pham Thi Thu Trang, Senior Manager, Industrial Business Development Division at Core5 – Indochina Kajima, at the Industrial Development Context in Hanoi and the North event.
Compared to the south, the north has more economic zones as per the government’s planning, notably the new coastal economic zone in Hai Phong spanning over 20,000 hectares. The north also attracts investment due to its competitive labor force, as the average wage in the south is currently the highest in the country, reaching 9.3 million VND.
While Vietnam’s industrial real estate market holds great potential, one of the main challenges is the shortage of skilled labor. Mr. Thomas noted: “This is particularly important as Vietnam aims to increase value-added in manufacturing. Despite an abundant labor force, especially in the north, most workers are low-skilled. To address this issue, education and training reforms are necessary to enhance workers’ skills.”
Additionally, Mr. Thomas emphasized that infrastructure development is crucial to enhancing Vietnam’s competitiveness. Currently, infrastructure projects are mainly concentrated in certain areas, but there is a need for expansion and synchronized development nationwide. Specifically, improving the transportation network connecting industrial parks with consumer markets will optimize logistics costs and facilitate businesses. Robust infrastructure will not only support the movement and transportation of goods but also enhance Vietnam’s attractiveness for foreign investment.
Empower Hierarchical Authorization, Corporates to be Autonomous and Accountable
The Ministry of Planning and Investment is finalizing the consultation process for the draft Decree on amending and supplementing certain provisions of Government Decree No. 10/2019/ND-CP on the exercise of rights and responsibilities of state capital representatives, and will soon submit it to the Government for approval. The proposed amendments align closely with the Prime Minister’s directive to enhance decentralization and delegation of powers, empowering State-owned enterprises and holding them accountable.
Strive to fully utilize the government budget in 2024
In terms of allocation, the disbursement of government investment capital requires an acceleration in implementation progress, aiming to fully disburse the state budget capital by 2024.
Government mandates construction projects during Tet holidays for critical projects
The government mandates that departments, agencies, and organizations encourage and motivate contractors to work relentlessly during the Lunar New Year period, with “3 shifts, 4 teams”, in order to strive for and surpass the schedule of key projects and works.
Southern industrial hub poised for growth with upcoming multi-billion-dollar highway projects
In 2024, the wealthiest and most populous province in the country will be gearing up to undertake an array of transportation projects worth approximately 45,000 billion Vietnamese Dong.
