C B R E R E S E A R C H

T I M E F OR A
TITLE C R I T I C A L M A K EOV ER

VIETNAM
HEAD LINE
INDUSTRIAL MARKET:

TIME FOR A
CRITICAL
MAKEOVER
M AY 2020

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CONTENTS
Upbeat Industrial
Property Market 7

Is Vietnam Truly
A Winner ? 13

Industrial Property
Market Outlook 19

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HEAD LINE

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HEAD LINE

EXECUTIVE
SUMMARY

I
n the context of surging demand due to
boosted manufacturing relocation from China to
other countries and limited industrial land supply
in traditional markets (tier I cities/provinces), rents
and occupancy of industrial parks in these areas
have elevated strongly. Besides, strong fundamental
factors of Vietnam including Free Trade Agreements
and governmental incentives have attracted
attention of foreign investors and developers.

M
anufacturing will continue to shift out of
China due to rising costs; trade conflict
with the U.S.; and manufacturers’ strategy
of reducing dependence on a single market and
enhancing supply chain resilience.

I
ndustrial property market in Vietnam will
undoubtedly benefit from this trend. Nonetheless,
Vietnam has faced many challenges in which
surging foreign investment from China (which could
leave Vietnam exposed to U.S. tariffs), imbalance
trade and infrastructure capacity constraints are
notable matters.

T
herefore, it is time for a critical makeovers of
Vietnam industrial property market in order
to take advantages of supply chain relocation
and manufacturing shifting. It does not only require
comprehensive supports form central government
in terms of incentives, risk management and public
investment in infrastructure but also developer’s
agility to meet the variety of demand from
manufacturers.

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INTRODUCTION

More investors and developers are Free Trade Agreements (FTA) are another important fac-
tor supporting demand for industrial land in Vietnam.
turning their attention to Vietnam as Vietnam currently has 13 FTAs with a further six either
they search for the next global under negotiation or signed but not yet in effect.
manufacturing hub. Land that can be developed into factories or
warehouses is the major focus of the country’s
The effects of protracted U.S.-China trade conflict
industrial property market. While the typical entry route
filtered through to Vietnam’s industrial property
is leasing industrial land for a 50-year period via an
market in 2019 as manufacturers looked to shift
upfront payment, the surge in demand from foreign
production to alternative markets. Average asking
manufacturers looking to set up factories in Vietnam is
rents for industrial land in Vietnam increased by an
generating requirements for ready-built properties.
average of 5-10% over the course of the year, with
some industrial parks reporting rental gains of up
Despite Vietnam’s attractive fundamentals, there exist
to 40% y-o-y.
numerous barriers to entry. These include a shortage of
industrial land supply in prime locations and a lack of
The severe disruption caused by COVID-19 has
infrastructure in key areas.
exposed the danger of overreliance on a single
base of production. Across key industries, nearly all
This Special Report by CBRE Vietnam provides an
supply chains can be traced to China, the world’s
overview of the Vietnam industrial real estate market;
dominant global manufacturer. Vietnam is likely to
identifies potential challenges and threats; and assesses
benefit from manufacturers’ plans to reduce supply
investment opportunities in the context of manufacturing
chain dependency on this (and potentially any
relocation, U.S.-China trade instability, and the impact
other) single market.
of the COVID-19 pandemic.

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UPBEAT
INDUSTRIAL
PROPERTY MARKET

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Manufacturing attracts the bulk of

FDI into Vietnam
EXPORT-ORIENTED
MANUFACTURING IS THE KEY
GROWTH DRIVER

Prolonged U.S.-China trade conflict over the course

of 2019 led to significant Foreign Direct Investment Vietnam’s FDI by Industry
(FDI) inflows to Vietnam in 2019, with China and Hong
Kong SAR capital increasingly active. Total registered 100%
FDI into Vietnam in 2019 was US$38 billion, of which 90%
the manufacturing sector accounted for US$24.6 80%
billion, or 64.5%. This marked an increase of 48%
y-o-y. 70%
60%
The manufacturing sector’s dominance in FDI is not a 50%
temporary trend. Export-oriented manufacturing is now
40%
well established as one of Vietnam’s key
economic growth engines, supported by the 30%
government’s provision of a range of incentives to 20%
attract foreign manufacturers. 10%
0%
The sector has benefitted from manufacturers seeking 2016 2017 2018 2019
to reduce exposure to U.S.-China trade conflict and
shift away from overreliance on a single base of Others
production by relocating both sourcing and Whole sale, retail and repair of car, motorbike
manufacturing out of China in what has come to be Real Estate Activities
known as a ‘China Plus One” strategy. Manufacturing
Source: Ministry of Planning and Investment of Vietnam.
Other key factors attracting manufacturing to Vietnam
include the country’s participation in FTAs with a
number of overseas countries, with significant tariff
incentives succeeding in broadening the country’s Vietnam’s industrial real estate
export markets and trading partners. market has seen buoyant activity
in recent years amid robust
Vietnam’s Export Turnover by Sector demand for factory set-up and
expansion.

31.2%
FDI sector
Industrial land for lease remains the most common
and keenly sought-after format in Vietnam. Growth
68.8% Domestic sector of industrial land supply in major provinces and cities
has slowed in recent years, leading to surging rents in
industrial parks. More recently, developers have been
constructing ready-built factories and warehouses to
maximise efficiency of land usage and cater to the full
Source: General Department of Vietnam Custom. spectrum of demand.
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Exports surge to new

high in 2019

FTAS BOOST TRADE VOLUME

Despite rising trade protectionism around the world, Key FTAs include the European Union – Vietnam Free
Vietnam’s exports continue to set new records on an Trade Agreement (EVFTA) and the Comprehensive and
almost annual basis. After suffering a sharp decline Progressive Agreement for Trans-pacific Partnership
due to the Global Economic Crisis (GFC) in 2008, (CPTPP). Solid export growth to western markets is
exports have risen by an average of 16.8% per annum expected to gain momentum in the coming years.
from 2010 to 2019. The trade balance remained in
surplus in 2019, standing at US$9.9 billion. FDI companies are playing a critical role in boosting
exports, contributing US$181.4 billion, or 68.8%, of
Vietnamese export value as of 2019, However, the
Free trade agreements have surge in export demand has placed significant strain
on existing transportation infrastructure, particularly
made a significant highways and ports.
contribution to Vietnam’s
rapid export growth.

Vietnam’s Trade Balance (USD billion)

300 15

250 10
Trade balance
Export - Import

200
5 Trade surplus

150
0 29.8% The EU
-5 CAGR 2016 - 2019
100
-10
50 -15
0 -20 The U.S
Trade surplus
32.5%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

CAGR 2016 - 2019

Export Import Trade balance

14.9% 14.0% China

Export CAGR Import CAGR Trade deficit

2015 2019
28.1%
CAGR 2016 - 2019

Source: General Department of Vietnam Custom.

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FTAs – Significant Impact

on Vietnam’s Export

Vietnam’s Trade Balance and Timeline of Free Trade Agreements

300 15

250 10

Trade balance
Export - Import

5
200
0 Export
150 Import
-5
100 Trade balance
-10
50 -15
0
-20
1993

2003

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019
EVFTA
CPTPP
Vietnam – EAEU
Vietnam – South Korea
Vietnam - Chile
ASEAN - India | ASEAN – Australia – New Zealand
Vietnam - Japan
ASEAN - Japan
ASEAN – South Korea
ASEAN - China
ASEAN
Effective time
Signing time

FACTS OF VIETNAM’S FREE TRADE AGREEMENTS

11effective
FTAs 13 signed
FTAs 03 under-negotiation
FTAs 52 countries

Source: Vietnam Chamber of Commerce and Industry, Ministry of Planning and Investment.

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Industrial Zones Benefit from

Growth of Export-oriented Manufacturing

Export-oriented manufacturing has been the key
growth engine of the Vietnamese economy in recent
years. This has had a direct impact on the industrial
real estate market through generating robust demand
for the leasing and acquisition of industrial land
across the country.
In particular, manufacturing
expansion and increasing
production capacity among
foreign companies diversifying out
of China has been driving strong
industrial land demand.
and Long An have risen significantly in recent years.
At the same time, however, the development of new
industrial parks has diminished due to a lack of
industrial land supply.
This is partly due to industrial land supply being under
the strict supervision of the central government. The
shortage of supply in traditional industrial
markets – the cities and provinces of major
Northern and Southern Economic Regions – is
particularly acute. Combined with strong demand
for manufacturing and storage space, this has led
to strong growth in rents for industrial land, which
increased by 5.0% - 9.1% y-o-y over the course of
2019 in major northern provinces such as Hanoi,
Bac Ninh, Hai Duong, Hai Phong and Hung Yen.

Major southern provinces recorded increments in

Major industries seeking industrial land and
ready-built factories includes electronic components,
automotive, garment, plastic, packaging and
construction materials.
Occupancy rates in industrial zones in Vietnam’s key
manufacturing hubs such as Binh Duong, Dong Nai
industrial land rents ranging from 8.4% to as high as
40% y-o-y during 2019. Particularly high escalations
were observed in well-located industrial zones with
good road connections to major sea and river ports
such as Cat Lai Port and Hiep Phuoc Port in Ho Chi
Minh City or Cai Mep Port System in Bà Rịa–Vũng Tàu.

Occupancy Rate, Southern Major Industrial Provinces and Cities, Vietnam

100%

90% HCMC
80%
Binh Duong
70%

60% Dong Nai

50%
Long An
40%

30% BR - VT
20%
2012 2013 2014 2015 2016 2017 2018 2019

Source: CBRE Research.

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Vietnam Industrial Parks - Q1 2020

APPROVED BY THE GOVERNMENT OPERATING INDUSTRIAL PARKS

258 Industrial Parks

330 Industrial Parks of
which
68,800 ha Total Land Area
97,000 ha Total Land Area
74.3% Occupancy Rate
Source: Department of Economic Zones Management, Ministry of Planning and Investment of Vietnam.

Occupancy rate
100%

80%

60%
8,942 ha 40%
Industrial land
20%

0%
HANOI HAI BAC HAI HUNG
PHONG NINH DUONG YEN

Major Northern 300

Industrial Region 91.4% 250
Hanoi, Hai Phong, Bac Ninh, Occupancy rate
USD/sm/term

200
Hai Duong, Hung Yen
150
100
50
0
US$65 - 260 HANOI HAI
PHONG
BAC
NINH
HAI HUNG
DUONG YEN
Asking rent
Minimum rent Maximum rent

Occupancy rate
100%

80%

60%
20,251 ha
40%
Industrial land
20%

0%
HCMC LONG BINH DONG BR-VT
AN DUONG NAI

350
82.9% 300
Major Southern Average 250
USD/sm/term

occupancy
Industrial Region 200
HCMC, Long An, Binh Duong, 150
Dong Nai 100
50

US$80 - 300 0
HCMC LONG BINH DONG BR-VT

Source: CBRE Research. Asking rent AN DUONG NAI

Minimum rent Maximum rent

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HEAD LINE

IS VIETNAM
TRULY
A WINNER ?

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I S V IETNAM TRULY A WI NN ER ? C R I T I C A L M A K EOV ER

Industrial Land Supply Remains Limited

in Major Manufacturing Regions
GROWTH IN INDUSTRIAL LAND
SUPPLY DECELERATES region, growth of industrial land supply has slowed
significantly in recent years compared to previous de-
SIGNIFICANTLY cades. In the southern region, the Compound Annual
Growth Rate of the volume of industrial land for lease
stood at 2.9% from 2011-2019, compared to 37.2%
The limited availability of from 1990 - 2000 and 12.5% from 2001- 2010. The
industrial land in Vietnam poses northern region displays a similar trend.
a major challenge for developers Together with rapidly increasing industrial land de-
and tenants mand, the shortage of vacant stock in key manufac-
turing regions has led to strong rental growth in recent
years. Although new industrial parks located further
CBRE estimates that it will take a minimum two years out from major urban areas or important seaports and
to expand land banks in existing industrial parks and riverports provide ample space and competitive rents,
even longer to develop new industrial parks. key infrastructure - especially expressways and trans-
shipment ports – connecting these properties to export
The slow establishment of new industrial parks as well and consumer markets remain poor. Rental growth
as construction delays to critical infrastructure projects is therefore being driven by established well-located
have led to elevated occupancy levels in established industrial parks with good connectivity to existing
industrial markets. In both the southern and northern transportation infrastructure.

Cumulative Industrial Land Supply, Cumulative Industrial Land Supply,

Northern Region Southern Region
14,000 80% 40,000 140%

12,000 70% 35,000 120%

60% 30,000
10,000 100%
50% 25,000
8,000
Y-o-Y

Y-o-Y

80%
Ha

Ha

40% 20,000
6,000 60%
30% 15,000
4,000 40%
20% 10,000

2,000 10% 20%

5,000

0 0% 0 0%
1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019

Total Land Area of IPs Growth of Total Land Area of IPs Total Land Area of IPs Growth of Total Land Area of IPs
Industrial Land For Lease Supply Growth of Industrial Land For Lease Industrial Land For Lease Supply Growth of Industrial Land For Lease

Source: CBRE Research Source: CBRE Research

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Ready-Built Industrial Property Emerges

as a New Trend
RAPID GROWTH IN SUPPLY
RECORDED IN MAJOR
Supply of RBF and WH in Major Northern
MANUFACTURING REGIONS
Cities/Provinces
Low labour costs, affordable rent and a steady supply of 1,800,000
raw land have powered the Vietnam industrial real estate
market for the past decade. 1,500,000

However, surging demand from foreign manufacturers 1,200,000

seeking to relocate to Vietnam – and a desire to
commence operations as soon as possible – are driving Sqm 900,000
demand for ready-built industrial properties. The cost
and time spent on building a standard new factory from 600,000
scratch in an unfamiliar market is far higher than that
incurred when purchasing a completed property that is 300,000
already integrated with supportive facilities and key
infrastructure. 0
2015 2016 2017 2018 2019
Due to rising occupancy in industrial land and the
prolonged trade conflict between the U.S. and China, Existing supply New supply
more Vietnamese developers are opting to construct
warehouses and factories across major industrial clusters. Source: CBRE Research
In 2019, northern cities and provinces saw the addition
of around 321,000 sq. m. of ready-built warehouse and
factory space, a figure equivalent to 20% of total factory
and warehouse space in the region and an increase of Supply of RBF in Major Southern
16.2% y-o-y on the volume of stock added the previous Cities/Provinces
year.
2,500,000
In the southern area, new ready-built factory and ware-
house space in 2019 totalled 559,000 sq. m., of which
ready-built factories accounted for 338,500 sq. m. (an 2,000,000
increase of 2.8% y-o-y) and warehouses accounted for
220,500 sq. m. (an increase of 59.8% y-o-y). The CAGR 1,500,000
of ready-built factory and warehouse space in the north-
Sqm

ern and southern regions from 2015 to 2019 was 15.8%

and 8.7%, respectively. 1,000,000

The trend towards constructing ready-built 500,000

factory space reflects Vietnamese industrial
property developers’ strategy of anticipating 0
and satisfying demand from foreign 2015 2016 2017 2018 2019

manufacturers seeking to relocate to Vietnam. Existing supply New supply

It also indicates a shift away from the long-established Source: CBRE Research
practice of leasing industrial land.
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Surge In FDI Raises

Transshipment Concerns
VIETNAM MUST CAREFULLY US$5.5 billion as of 2019, an increase of 26x. Newly
licensed FDI capital of China and Hong Kong SAR
MANAGE RISK EXPOSURE TO soon at US$5.2 billion in 2019, a rise of 121% y-o-y,
GLOBAL TRADE CONFLICT while the number of new projects reached 1,011, an
increase of 84.5% y-o-y.
Over the past three years – particularly since the onset
Coming amid protracted trade conflict between the
of trade conflict between the U.S. and China -
U.S. and China, along with rising geopolitical tension
Vietnam has recorded a surge in FDI from China and
between the two countries, the increase in FDI from
Hong Kong SAR.
China into Vietnam raises numerous concerns.
FDI from China and Hong Kong SAR reached
The main issue is the origin of export products and the
nearly US$11.9 billion in 2019, an increase of
potential risk of Vietnam becoming a transshipment
109.5% y-o-y. Between 2017 – 2019, FDI capital
location for Chinese goods. With China’s significant
from China and Hong Kong SAR achieved a CAGR of
trade surplus with the U.S. one of the main factors
35%.
triggering the trade conflict, Vietnam could become
embroiled in a similar situation should its trade surplus
FDI from China and Hong Kong SAR into Vietnam
with the U.S. increase significantly.
via stock purchasing (capital contributions) witnessed
significant growth in 2018 and 2019. By number of
The recent discovery of illegal transshipment cases in
projects, those involving stock-purchasing have been
Vietnam’s export goods poses a significant risk. Since
the most numerous (accounting for over 61% of total
Vietnam’s economy relies heavily on manufacturing,
registered projects per year) since 2017. Stock-pur-
especially for exports, any tariffs imposed by the U.S.
chasing FDI capital of China and Hong Kong SAR
would have a negative impact on both the economy
surged from roughly US$211 million in 2016 to about
and demand for industrial real estate.

FDI of China and Hong Kong into Vietnam by Type of Capital and Number of Project
14.0 2,500

12.0
2,000
10.0
USD billion

1,500
Project

8.0 Newly licensed capital

Stock purchasing capital
6.0
1,000
Increased capital
4.0
500 Increased capital projects
2.0
Newly licensed projects

0.0 0
Stock purchasing projects
2016 2017 2018 2019

Source: Ministry of Planning and Investment.

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U.S. Trade Imbalance

Heads Potential Risks
VIETNAM’S TRADE SURPLUS WITH goods. Chinese and Vietnamese companies have
used Vietnamese ports as an intermediate
THE U.S. HIT A NEW HIGH IN 2019 transportation point in order to avoid heavy U.S. tariffs
or to achieve greater profits from tax arbitrage.
Vietnam has recorded a trade surplus with the U.S.
in each of the last five years, with the surplus rising At the same time, Vietnam depends on China for raw
steadily on a y-o-y basis. In 2019, the U.S – Vietnam material for its manufacturing industry, as reflected by
trade surplus reached US$46.4 billion, an increase the high volume of imports it receives from its northern
of 33.4% y-o-y and the highest figure since 2013. neighbour. With industrial development in Vietnam
The U.S – Vietnam trade surplus rose at a CAGR strongly correlated with Chinese manufacturing and
of around 11.1% from 2015 to 2019 was around material supply, any unexpected disruption could
11.1%. significantly impact Vietnamese production.

Vietnam’s trade surplus with the U.S has caused alarm

within the U.S. government, with U.S. Trade
Representative Robert Lighthizer stating to a Senate As long as trade with developed
committee in July 2019 that Vietnam must reduce the
countries remains a key growth driver,
deficit and open its market to more imports or services
from the U.S. Vietnam’s manufacturing industry and
industrial real estate market will be
This situation has been further compounded by Viet- affected by rapid changes in global
nam’s emergence as an ideal location for companies trade and supply chains.
seeking a location for the export of Chinese-made

Vietnam - USA Trade Balance Vietnam - China Trade Balance

70 50 80 0
45 70 -5
60
Trade balance (USD Billion)

Trade balance (USD Billion)

40
Turnover (USD Billion)

Turnover (USD Billion)

60 -10
50 35
30 50 -15
40
25 40 -20
30 20 30 -25
20 15
20 -30
10
10 10 -35
5
0 0 0 -40
2013

2014

2015

2016

2017

2018

2019

2013

2014

2015

2016

2017

2018

2019

Export turnover Import turnover Export turnover Import turnover

Trade balance Trade balance

Source: General Department of Vietnam Custom.

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Infrastructure Continues To Suffer From

Capacity Constraints

GOODS TRANSPORTATION RELIES

Freight Volume by Type of Transportation
HEAVILY UPON ROAD NETWORKS
6

Air cargo volume from Vietnam has achieved rapid 5

growth in recent years but still accounts for just 0.03% 4

Million TEUs
of total cargo transportation volume per annum. Sea 3
cargo volume has also registered impressive growth,
2
rising by a CAGR of 30.1% from 2015-2019, but
most cargo from Vietnam is still transported by road. 1

0
2011 2012 2013 2014 2015 2016 2017 2018 2019
Tan Cang - Cat Lai Port Tan Cang - Cai Mep Port
Amount of Goods Through Major Ports
Source: General Statistics Office of Vietnam.
0.3% 0.03%
CARGO THROUGHPUT VOLUME
VIA PORTS HAS SURPASSED
22.9% EXPECTATIONS
Road
Marine Vietnam’s major ports including Cat Lai (the coun-
try’s largest river port), Cai Mep and Hai Phong have
Rail reported a dramatic increase in container volume in
76.8% recent years, supported by robust growth in export
Air
demand. Despite the improvement and expansion of
cargo handling capability and transportation to and
from ports, congestion remains a key challenge as
Vietnam’s infrastructure feels the strain from surging
Source: Saigon Newport Corporation. demand resulting from manufacturing relocation.

The main challenges facing 20.2% 11.3%

Seeking source of components Lack of skilled labored
companies which already shifted and assembly out of the US

production, relocated
manufacturing operations or are
17.9% 8.9%
Building new connections with Maintaining supplier
local suppliers etc. quality and production
even considering such options capacit

11.9%
Heavy port congestion and/or
Source: Resilience360, DHL. shipping cost

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HEAD LINE

INDUSTRIAL
PROPERTY
MARKET
OUTLOOK

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COVID-19 Pandemic To Have

Short-Term Negative Impact
OUTBREAK LIKELY TO STRENGTHEN MEDIUM - TO LONG - TERM DEMAND
FOR MANUFACTURING RELOCATION

SHORT -T ER M I M P AC T
Manufacturers in China resumed production in April as industrial and economic
activity began to recover from the COVID-19 outbreak. Aside from some
automotive and electronics manufacturers, there is unlikely to be a short-term
jump in relocation requirements in Vietnam.

The coming months may see weaker industrial property leasing and
purchasing - mostly from investors and manufacturers from major
Asian markets such as China, Korea and Japan - due to travel
restrictions and more cautious market sentiment.

Although the logistics industry has suffered from disruption to

transportation, exports and imports, demand from e-commerce
platforms has underpinned the warehouse market as consumers
are forced to shop online.

MED I U M - T O L O N G - T E RM
This will encourage companies to
review and transform their global
supply chain models as they attempt
to recover from the current disruption
while looking to mitigate the impact of
similar events that may occur in future.
Vietnam’s success in quickly containing the outbreak
bode well for a rapid recovery in industrial demand.
Requirements for industrial land and ready-built
factory space will increase, supported by the signing
of additional FTAs and a steady wave of relocations.

The deep and prolonged dislocation
caused by the COVID-19 pandemic -
which caused a simultaneous collapse in
global supply and demand within the space
of a few months – has uncovered serious
flaws in global supply chain models and
raised questions as to the viability of
long-accepted supply chain practices.
CBRE expects the pandemic to add impetus to plans
to reduce supply chain dependency on China (and
potentially any other) single market. This will form
part of an overarching theme of a move away from
centralised supply and towards greater diversification
– a trend likely to benefit Vietnam.

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How Companies Responded to

Uncertainty of The Trade Tension
OBSERVATION FROM PHASE 1 OF THE U.S. – CHINA TRADE DEAL

Preferred destinations for moving production out of China?

27%
Not looking to
3.3%
Unaffected by the situation
move production

25
8.3%

.8
Long-established connections with

%
.7%

suppliers and customers etc.

11%
11

Not appicable
Vietnam
WHY?
12.9

The cost of moving production is

11% greater than the cost of the tariffs
%

India
%

Relocating production would take years

.8
20

19.2%
7.7% Expecting tariffs to be removed eventually
EU
Other
6.7%
Mexico

Actions to mitigate impacts of Months of contingency that

the trade war on production companies planned to help cope
and supply chain in China ? with the trade war uncertainty ?
Other 3% 25.3%

Dalaying market expansion

or investment decisions 4.9% 19.8%

Not applicable 14.2%

14.6%
11.1%
9.3% 9.9%
Moving production to
avoid tariffs
20.1% 6.2%
4.3%
Changing or identifying
alternative suppliers
22.6%
0

3-6

6 - 12

12 - 18

18 - 24

24 or more

Other
1- 3

No action but monitoring 34.8%

the situation closely

Source: Survey of Impact of the U.S - China trade war on Global supply chains, DHL Resilience360.
Note: The survey was conducted by DHL Resilience360, an innovative supply chain risk management software platform. With total of 267
responses on variety of questions, the survey attempts to reveal how global corporations, coming from diverse industries, assess and cope with
challenges from the trade war.

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I ND U STRIA L P RO P ERTY M A RK E T O U T LO O K C R I T I C A L M A K EOV ER

Market Outlook

Average Occupancy Rate, Southern and Industrial Asking Land Rent, Southern and
Northern Industrial Zones - Q1, 2020 Northern Industrial Zones - Q1, 2020
100% 350
90%
300

USD/sqm/remaining term
80%
70% 250
60%
200
50%
40% 150
30% 100
20%
10% 50
0 0
Tier-1 Tier-2 Tier-1 Tier-2 Tier-1 Tier-2 Tier-1 Tier-2
Northern Region Southern Region Northern Region Southern Region

Source: CBRE Research. Source: CBRE Research.

SHORT-TERM
SUPPLY
• Industrial land supply in good locations (close
to key ports or major urban areas) will remain
limited.
• Growth in supply is set to remain low, while
expansion of existing supply will be difficult.
• Industrial land development in emerging areas
will remain slow due to poor accessibility to key
river/sea ports and large consumer markets.
LONG-TERM
SUPPLY
• There will be significant growth of industrial land
supply in tier II provinces/cities and remote areas
of tier I provinces/cities.
• Supply in major urban areas is expected to de-
crease due to the lack of the industrial land bank
in urban areas and forced factory relocations.

DEMAND
• Steps to east trade tension with the U.S. and
policies to ward off potential tariffs are likely to
weaken demand from Mainland China and Hong
Kong in the short term. However, FTAs will provide
a more sustainable demand driver.
• Despite competitive rents and low occupancy,
demand in tier II regions will not gain significant
traction, mainly due to poor infrastructure.
• The development of ready-built factory space will
continue to gather momentum.
DEMAND
• Manufacturers seeking to diversify production
away from China to enhance supply chain resil-
ience and mitigate impacts of unexpected events
will generate additional demand for industrial
property in the long-term.
• The relocation of industrial property to remote/
rural areas will create more demand in tier II
regions as infrastructure improves.

PERFORMANCE
• Industrial parks in major industrial areas will
continue to report occupancy (over 90%).
• Industrial land rents are expected to escalate
amid limited supply in good locations
PERFORMANCE
• New large industrial land supply and the addition
of new stock in emerging locations will curtail
rapid rental growth.
• Occupancy rates will increase rapidly in industrial
parks adjacent or with good accessibility to major
port complexes.

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Infrastructure Holds The Keys To Emerging

Industrial Regions

To Cao Bang and

Border gates in Lang Son
(Vietnam - China border)

To Lao Cai
(Vietnam - China border) Chi Lang
Thai Nguyen
To Mong Cai
(Vietnam - China border)

Noi Bai
International
Airport ICD
Bac Ninh

Vinh Phuc
Bac Ninh

ICD My Dinh Van Don

Hanoi ICD Hai Duong International Airport
Hai Ha Long
Duong Cai Lan Port
Hai Phong Cat Bi International Airport

Hai Phong Port Complex

Hung Yen
To Ninh Binh

National Highways Ha Long – Van Don Expressway

Hanoi – Hai Phong Expressway Van Don – Mong Cai Expressway
Hai Phong – Ha Long Expressway Ninh Binh – Hai Phong Expessway
Ha Noi – Thai Nguyen Expressway Huu Nghi – Chi Lang Expressway

Ha Noi – Lao Cai Expressway Industrial/Logistics hub

Ha Noi – Lang Son Expressway

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Infrastructure Holds The Keys To Emerging

Industrial Regions (continued)

To Moc Bai
(Vietnam - Cambodia border)

Ben Cat

Thu Dau Mot

City
Bien Hoa City
Cu Chi

Tan Son Nhat

International Airport

HCMC
Long Thanh International Airport

Cat Lai Port

Hiep Phuoc Port Complex

Thi Vai - Cai Mep Port Complex

Vung Tau City

To Mekong
Delta Region

HCMC - Long Thanh - Dau Giay Expressway Ben Luc - Long Thanh Expressway
HCMC - Trung Luong Expressway Ring Road No.3 of HCMC
National Road 1A Moc Bai – HCMC Expressway
National Road 51 East- West Boulevard
Trung Luong - My Thuan Expressway Provincial Road 769
Bien Hoa – Vung Tau Expressway Industrial/Logistics hub

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 CONCLUSION
TIME FOR A CRITICAL MAKEOVER T I M E F OR A
C R I T I C A L M A K EOV ER

T
he focus of industrial land supply will broaden to emerging
markets (tier II cities/provinces) offering more competitive
rents and lower occupancy rate. However, demand for land
in these areas will remain weak in the short-term due to poor
infrastructure and lack of accessibility to river and seaports.

I
ndustrial land supply in traditional markets (tier I cities/
provinces) is expected to remain limited in the short-term. Rents
and occupancy in these markets will therefore remain at
elevated levels. However, new supply is expected to increase in
the long-term as new industrial parks come on stream in
emerging locations some distance from major urban areas.

M
anufacturing will continue to shift out of China due to
rising costs; trade conflict with the U.S.; and
manufacturers’ strategy of reducing dependence on a
single market and enhancing supply chain resilience.

E
merging industrial property market in Vietnam will
undoubtedly benefit from this trend. However, numerous
challenges remain such as surging foreign investment from
China (which could leave Vietnam exposed to U.S. tariffs) and
infrastructure capacity constraints. Incentives including deduction
or exemption of tax and land usage fee should be highly
considered in order to attract more foreign manufacturers,
especially in time of boosted relocation plan.

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C R I T I C A L M A K E OV E R

SCOPE OF
RESEARCH
LIMITATIONS

METHODOLOGY
This CBRE Vietnam Special Report was compiled by
conducting industrial real estate market research in
major provinces and cities considered as Vietnam’s
main industrial and transportation hubs (named as
Tier-1 cities/provinces). The major northern industrial
markets are Hanoi, Hung Yen, Bac Ninh, Hai Duong
and Hai Phong. The major southern industrial markets
are Ho Chi Minh City, Binh Duong, Dong Nai and
Long An. These markets are also the core cities and
provinces of the northern and southern key economic
zone of Vietnam.

Tier II cities/provinces are considered as emerging

industrial real estate markets owing to their more
attractive industrial land rent as well as large available
land supply. These provinces and cities also possess
both existing and future road links with current major
industrial areas. The emerging industrial real estate
markets covered in this report are Vinh Phuc, Bac
Giang, Quang Ninh, Ha Nam, Nam Dinh and Thai
Binh in the Northern region, and Tay Ninh, Binh
Phuoc and Ba Ria – Vung Tau in the Southern region.

MARKET DATA

CBRE Vietnam Research and Consulting and CBRE

Vietnam Industrial Leasing Services collected market
data (industrial land asking rent and occupancy rate)
for this report. Provided data represents the average
data figure of the researched area based on our
calculations and adjustments in order to produce an
accurate assessment of the Vietnam industrial real
estate market.

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C R I T I C A L M A K EOV ER

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 T I M E F OR A
C R I T I C A L M A K EOV ER

CONTACT
DESMOND SIM DUNG DUONG, MRICS HIEU LE
Executive Director, Senior Director, Director,
Head of Research, Head of Research Office & Indsutrial & Logistics Services
Singapore and South East Asia Vietnam Vietnam

desmond.sim@cbre.com.sg dung.duong@cbre.com tronghieu.le@cbre.com

(+65) 6326 1638 (+84) 28 6284 7668 – Ext: 288 4033 (+84) 28 6284 7668 – Ext: 288 4057

CBRE Vietnam Co., Ltd.

Research & Consulting

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