Vietnam’s Industrial Real Estate positioned to benefit from global supply chain transformation

While recent market discussions have largely focused on oil price movements and developments surrounding the conflict in the Middle East, Vietnam, though not immune to global headwinds, continues to quietly build on solid foundations. In this report, we review the performance of Vietnam’s Industrial Park (IP) sector in 2025 and its outlook for 2026.

We have included a video version right below, featuring an AI avatar of our real estate analyst, Vinh Bui, CFA, for those who prefer a concise visual overview. Our full analysis is provided in the following text.

2025 recap:

Strong leasing demand—bolstered by small size tenants, while new IP approvals strengthen the medium-term supply outlook

Industrial land demand remained firm in 2025, with total absorption reaching 480ha in the North and 165ha in the South, according to CBRE. The moderation in absorption was primarily driven by supply constraints rather than demand weakness, particularly in the South where large, contiguous plots remain limited. Meanwhile, average land lease prices continued to increase to USD143/sqm (+4.0% y/y) in the North and USD183/sqm (+4.4% y/y) in the South, indicating sustained pricing power across key industrial hubs. FDI-led manufacturing investment continued to underpin industrial land demand, as disbursed FDI into Vietnam rose by 9.0% y/y to USD27.6bn, reaching a five-year high despite uncertainty surrounding U.S. tariff policy. Leasing sentiment also improved toward year-end as tariff visibility increased and Vietnam’s competitiveness remained intact.

In parallel, the ready-built factory (RBF) segment continued to expand, reflecting changing tenant preferences toward greater flexibility. Net RBF absorption remained stable at over 500,000 sqm in the North and around 600,000 sqm in the South. Occupancy rates stayed elevated at approximately 85% and 95%, respectively, while rental rates continued to edge higher. This trend is increasingly driven by supplier localization and the entry of small- and mid-sized manufacturers seeking faster deployment and lower upfront capital requirements.

On the supply side, 2025 marked a clear turning point with new IP approvals accelerated significantly, with 42 new projects adding approximately 8,400ha of leasable land, equivalent to an approximate 9.0% increase in total leasable area. This pickup reflects improving legal procedures and stronger policy support, which have helped ease long-standing bottlenecks in project licensing and land clearance. While these newly approved projects will not translate into immediate supply, they provide greater visibility going forward. As a result, despite relatively tight near-term market conditions, particularly in prime locations— the strengthened approval pipeline supports a favorable supply outlook over the medium term.

2026 and medium-term outlook:

Global supply chain diversification remains the key demand driver

Looking ahead, global supply chain diversification is expected to remain a structural trend that continues to drive industrial land demand. As global uncertainty remains elevated—driven by trade policy shifts and geopolitical tensions—companies are likely to continue reconfiguring production networks to enhance resilience, manage risks, and optimize costs, suggesting that relocation and geographic diversification will persist over the medium term. At the same time, higher value-added and advanced manufacturing segments—typically more agile and better resourced—are leading this transition. These segments are more supply chain-intensive and require larger, more sophisticated industrial facilities, further supporting demand for high-quality industrial land.

Vietnam’s track record over the past decade highlights its ability to capture these structural shifts. The country has consistently attracted relatively stable and comparatively higher FDI inflows than many Southeast Asian peers, with investment broadly diversified across sectors such as electronics, machinery, textiles, and furniture. Looking ahead, Vietnam is well positioned to remain a key beneficiary of continued supply chain reallocation, supported by structural advantages including its (1) strategic geographic location, (2) ongoing infrastructure development, and (3) a competitive operating environment:

(1) Vietnam’s strategic location: a structural advantage gaining relevance amid accelerating global supply chain realignment

At the core of Vietnam’s IP sector investment case lies a structural advantage—its geographic positioning adjacent to China’s manufacturing heartland, alongside its emerging role as a regional connectivity hub within Southeast Asia (SEA), enables close integration with China-centered supply chains while serving as a gateway to broader global markets. As global production networks evolve, this geographic advantage is becoming more relevant, positioning Vietnam beyond a low-cost alternative or a temporary beneficiary of supply chain shifts.

Looking North, Vietnam’s proximity to China allows manufacturers to relocate selected production stages while maintaining close integration with upstream suppliers in key manufacturing regions such as the Pearl River Delta and Yangtze River Delta. Among China’s 14 neighboring countries, Vietnam stands out as the only location with sufficient industrial infrastructure and capacity to support this shift without requiring a fundamental restructuring of supply chains. Northern Vietnam, in particular, enables efficient cross-border movement from hubs such as Guangdong into an integrated industrial ecosystem within hours, supported by established road connectivity and streamlined border operations. This facilitates a gradual reallocation of production while preserving cost efficiency and operational continuity, underpinning the emergence of key industrial clusters, with provinces such as Bac Ninh, Hai Phong, and the greater Hanoi region becoming major destinations for electronics, machinery, and high-tech manufacturing.

Beyond serving as a relocation destination, Vietnam is increasingly positioning itself as a regional hub within SEA, supported by its central location along key maritime trade routes. The country sits at the intersection of intra-Asia trade flows, enabling efficient connectivity to global shipping networks, while also benefiting from an extensive coastline naturally conducive to deep-sea port development. This geographic advantage, further supported by ongoing infrastructure investments to enhance connectivity, is reinforcing Vietnam’s growing relevance within the region. SEA’s rising importance as a global manufacturing and logistics hub—supported by its strategic location along major international trade routes and a relatively stable geopolitical environment—further strengthens Vietnam’s positioning.

(2) Rapid infrastructure development: enhancing operational readiness to leverage the strategic positioning

Supported by an increasingly ambitious national investment pipeline, infrastructure development in Vietnam is accelerating to better align with manufacturing demand. Continued investment in expressways, deep-sea ports, airport capacity, and high-speed rail is expected to ease bottlenecks and expand the country’s effective industrial footprint, enabling manufacturing to extend beyond traditional core hubs into emerging provinces. This, in turn, supports a more balanced and scalable industrial ecosystem, translating Vietnam’s strategic geographic positioning into tangible operational advantages.

In the South, large-scale projects such as Long Thanh International Airport, the expansion of expressways and ring roads, and ongoing upgrades to the Cai Mep–Thi Vai deep-sea port system are enhancing connectivity across the country’s most important export corridor. These are complemented by continued expansion of key highways such as the North–South Expressway and improved linkages between industrial provinces like Binh Duong, Dong Nai, and Long An, supporting the decentralization of industrial activity into satellite provinces. In the North, the continued build-out of highway networks alongside the development of the Hanoi–Hai Phong–Lao Cai railway corridor is expected to enhance cross-border logistics efficiency, reinforcing the region’s role within China-linked supply chains. The development of Gia Binh International Airport is set to expand air cargo capacity for high-value manufacturing segments such as electronics and semiconductors. Meanwhile, the continued expansion of Lach Huyen deep-sea port—targeting capacity of around 10 million TEUs—further strengthens the region’s position as a key export gateway.

Additionally, infrastructure development is not only about transportation, but also about industrial readiness. The rapid expansion of ready-built factories (RBF) and ready-built warehouses (RBW), alongside improvements in utilities, power supply, and integrated industrial services, allows manufacturers to commence operations more quickly and with lower upfront capital commitments. This is increasingly critical in site-selection decisions, as companies prioritize speed-to-market and operational flexibility. As a result, Vietnam is not only improving connectivity but also enhancing its ability to convert investment commitments into actual production capacity more efficiently.

(3) Competitive labor costs, policy support, a broad trade network, and energy security support scalable industrial growth

Vietnam’s industrial investment and operating environment continues to improve, supporting long-term industrial expansion. While labor costs remain competitive relative to regional peers, the country’s appeal is increasingly driven by improving productivity, political stability, a consistent pro-investment policy framework, and an extensive network of 17 FTAs that provide preferential access to major global markets. At the same time, policy execution is strengthening, with regulatory changes streamlining administrative procedures, decentralizing investment approvals, and simplifying land clearance. This reduces bureaucratic friction, shortens project timelines, and enables faster project implementation, allowing tenants to ramp up operations more efficiently—an increasingly important factor for multinational corporations seeking speed and flexibility in capacity allocation.

At the same time, energy security remains a key pillar, with the government expanding power generation capacity, strengthening grid stability, and encouraging private participation to mitigate supply disruption risks—particularly for energy-intensive industries such as electronics and semiconductors. In parallel, targeted incentives for high-tech and higher value-added industries, including tax benefits and preferential land access, are attracting more sophisticated manufacturing activities. This is further supported by the development of the Free Trade Zone (FTZ) model, which offers one-stop licensing, streamlined customs procedures, and simplified administrative processes.

Against this backdrop of rising global demand and Vietnam’s structural advantages, the strong pickup in new industrial park approvals in 2025 is expected to materially expand land supply in the coming years, further reinforcing the sector’s growth trajectory.

IP companies’ financial performance and valuation

Robust sales growth and margin expansion drive strong earnings, while valuation remains undemanding

Amid favorable sector macro conditions, Vietnam’s leading IP developers have consistently delivered solid operating performance. Since 2019, revenue from land leasing among the top 9 listed IP companies has grown at a 12.6% CAGR, while rising leasing prices have driven an expansion in gross profit margin from 45.2% to 61.3%. At the same time, the business model remains capital-efficient, with upfront lease payments and strong leasing activity enabling early cash generation, limiting reinvestment needs, and kept leverage at moderate levels, thereby supporting net profit growth of around 15.1% CAGR and consistently high cash dividend payout ratios of 55–60%.

Despite this solid operating track record and a favorable structural backdrop, the sector’s valuation remains relatively undemanding. Current P/B ratios of 1.5x are below historical averages, while reported book values do not fully reflect the potential upside from future land bank development. High occupancy rates in key regions, accelerating project approvals, and sustained tenant demand provide a solid foundation for continued growth. Developers with large, well-located land banks, strong financial positions, and proven leasing capabilities are particularly well positioned to benefit. Against this backdrop, Vietnam’s IP sector offers exposure to a structural growth story supported by supply chain diversification, improving infrastructure, sustained FDI inflows, and policy-driven industrial upgrading, while still trading at attractive valuations that may not fully capture its long-term potential.

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