Vietnam’s new Land Laws ( Real Estate Business Law ) and its guiding regulations are simplifying legal procedures to boost the supply of industrial real estate, creating more opportunities for foreign investors and fortifying the nation’s position as a Southeast Asian industrial hub.

As of November 2024, foreign direct investment ( FDI ) inflows into Vietnam reached US$27.26 billion, according to global property services firm Cushman & Wakefield, increasing by 1.9% over the same period last year, with Singapore, South Korea, China and Hong Kong leading the way.

Statistics from 2020 to September 2024 show that the total value of property merger and acquisition ( M&A ) transactions reached US$2.94 billion, with industrial real estate being the leading segment, accounting for 40%. In the first nine months of 2024, industrial real estate, Cushman & Wakefield notes, accounted for 91% of the total transaction value of US$178 million in Vietnam.

Company moves

Taiwan’s Tripod Technology Corporation this May leased 18 hectares of land in Chau Duc Industrial Park in Ba Ria-Vung Tau province near Ho Chi Minh City. The firm, which has a total registered capital of US$250 million for the project, aims to build a factory for manufacturing electronic circuits and circuit boards.

Thai conglomerate Siam Cement Group ( SCG ) has stated it will invest another US$700 million to upgrade its US$5 billion Long Son Petrochemicals ( LSP ) complex in the same province, and diversify the facility’s raw materials amid a suspension of operations starting this November. LSP, the largest petrochemical complex in Vietnam, SCG says, will start using ethane imported from the US as a raw material because ethane is cheaper than naphtha, a fossil fuel product.

In Bac Ninh province near Hanoi, Taiwan’s Johnson Health Tech Corporation has registered a US$100 million project in Thuan Thanh 1 Industrial Park to build a factory for manufacturing fitness equipment.

Singapore’s investment fund Mapletree Logistics Trust spent over US$50 million this March to acquire two Grade-A warehouses in Binh Duong province next to Ho Chi Minh City and Hung Yen province near Hanoi.

The Vietnamese industrial property market has also witnessed emerging types within industrial zones. This May, Vietnam’s VNG Corporation and Singapore-headquartered ST Telemedia Global Data Centres, better known as STT GDC, announced a partnership to build and operate international-standard data centre projects in Ho Chi Minh City.

Two months later, Singapore-listed Daiwa House Logistics Trust completed its acquisition of the D Project Tan Duc 2 in Long An province bordering Ho Chi Minh City for US$26.5 million, marking the first time that the real estate investment trust ( Reit ) bought industrial land in Vietnam.

The deal followed another Reit business partnership, which saw Lineage, one of the world’s largest temperature-controlled warehouse Reits, complete a joint venture agreement with Vietnamese cold storage operator SK Logistics late last year to operate two cold storage projects in Hanoi and Hung Yen nearby. The two facilities serve a diverse range of customers, including supermarket chains.

As industrial property demand is on the rise, foreign investors are paying more attention to clean and sustainable energy. Temasek-backed Sembcorp Industries has completed its acquisition of nearly all shares in three out of four subsidiaries of Hanoi-based Gelex Group through its subsidiary Sembcorp Solar Vietnam. Through the transactions, the Singaporean conglomerate will add a total of 196 megawatts of wind and solar power capacity to its portfolio.

However, industrial property M&A deals are not all going smoothly, says Trang Bui, country head of Cushman & Wakefield Vietnam. “As for foreign investors, the main difficulties lie in legal issues, administrative procedures and access to good real estate. Finding good opportunities with stable income streams is also a major obstacle.

“Moreover, most properties for sale are not widely advertised, limiting access to good assets. Accurate asset valuation is a significant challenge, as incorrect valuation can lead to inaccurate decisions and losses.

“Therefore, valuation is often handled by reputable international firms. Ensuring post-M&A operations is another challenge as this requires harmony in processes, systems and corporate culture.”

Trump effect

This November, the announcement of Donald Trump’s victory in the US presidential election has created a buzz in the market regarding the future development of the industrial property sector. Looking back at the 2017-2018 period, some of Trump’s trade policies were contributing factors that influenced major global manufacturers to expand production facilities outside of China under the “China +1” strategy and supply chain diversification.

The second Trump administration will probably not be as beneficial to Vietnam’s economy as the first one was, but the risk that Trump’s tariff policies will derail the Southeast Asian nation’s healthy economic trajectory is minimal – in sharp contrast to claims made in some articles published since his election, says Michael Kokalari, a chartered financial analyst and chief economist at Ho Chi Minh City-based VinaCapital, a leading investment management group in Vietnam.

The American economist highlights that Trump’s recent appointment of Scott Bessent as US treasury secretary will benefit Vietnam. Bessent has repeatedly referred to Trump’s tariff proposals as “maximalist” positions that would likely be watered down in negotiations.

“More importantly for Vietnam,” Kokalari points out, “Bessent favours considering US geopolitical objectives when determining tariff levels on individual countries.”

Investments by major South Korean companies, he adds, continue to flow into Vietnam because factory wages in South Korea are nearly 10 times those in Vietnam, and South Korea’s population is ageing at a faster pace than Japan’s did at the peak of its demographic decline.

“Companies are unlikely to change plans to produce in Vietnam if exports from South Korea and Vietnam to the US were to suffer from the same tariff burdens,” the American economist says. “And it is possible that Vietnam may even get favourable tariff treatment vis-à-vis its Asia exporting peers under Trump.”

Looking ahead

During the 2024-2027 period, Vietnam’s supply of industrial real estate, according to Cushman & Wakefield, will grow significantly, creating opportunities for foreign investors to participate in the Vietnamese M&A market.

As for the provinces in both the Northern Key Economic Region and the Southern Key Economic Region, the future supply of industrial land will increase by 10,600 hectares, with an annual growth rate of 7.5%. Meanwhile, ready-built factories and warehouses will increase by 1.9 million square meters and 2.6 million square metres, respectively, with annual growth rates of 5.9% and 10.1%.

The shortage of high-tech assets, modern warehouse space, together with strong demand from businesses in the region, is driving the potential of the industrial real estate market.

Cushman & Wakefield’s team in Vietnam, Trang Bui shares, continues to receive requests from investors for consultation regarding industrial and logistics assets through the acquisition of land funds and operating properties. Asset quality, rental growth rate, transaction size and remaining land use rights are key factors considered in investor decisions.

“With the Vietnamese government’s efforts and ambition to promote the country as a new industrial hub in Southeast Asia,” she says, “we believe that the local industrial property market will continue to be a magnet for investors across the world.”