Vietnam’s industrial and logistics market has experienced remarkable growth and development in recent years. With an expanding market size and an increasing number of institutional investors, Vietnam is swiftly evolving into one of the most attractive investment destinations in Southeast Asia. This blog will shed light on the transformation of Vietnam’s industrial and logistics market and how this trend may influence future market developments.

Expansion and investor dynamics

Over the past decade, Vietnam’s ready-built facilities market has witnessed an unprecedented surge in size, expanding by an impressive 19 times since 2008. This growth can be attributed to several factors, including favourable government policies, a young and dynamic workforce, and improved infrastructure. The influx of institutional investors has also played a significant role in boosting the market’s expansion.

From humble beginnings, Vietnam’s ready-built industrial and logistics market, including Ready-built warehouse (RBW) and Ready-built factory (RBF), has grown exponentially, attracting a growing number of institutional investors. In 2008, the market had just one institutional investor, Mapletree. As of the end of H1 2024, more than fifteen institutional investors are actively engaged in the market. Notable developers include BWID, SLP, LOGOS, Frasers and more. This influx of institutional players highlights the growing confidence in Vietnam’s potential as a lucrative hub for industrial and logistics activities.

The presence and influence of institutional investors are evident in the market’s growth statistics. In 2008, these investors were responsible for a mere 10% of the market share. By the end of 2023, this figure soared to 37%, indicating their pivotal role in market development.

Figure 1:  Shift in industrial ready-built supply landscape

1. Total leasable land area and ready-built supply within the coverage markets
2. Future supply till 2027F includes under-construction and proposed projects that have a clear development timeline publicly available
at the reported time and within the coverage market only. This figure is subject to change upon the latest development plan.
Source: JLL Research, 2023 Update

Vietnam’s ready-built industrial and logistics sector is poised for continued growth until 2027. Given the solid foundation and increasing institutional interest, it’s projected that institutional investors could account for nearly half of the market by the end of 2027. This suggests a shift towards a more mature and structured market environment.

Despite substantial supply growth driven by rapid investor and developer expansion, the market maintains a solid foundation to support healthy performance. The occupied space of the ready-built warehouse (RBW) and ready-built factory (RBF) market grew at a CAGR of 20.3% and 17.0%, respectively, during the 2018-2023 period, outperforming the supply side’s growth rate of 15.7% and 17.0%. Specifically, when considering the basket of institution-grade properties operating for more than a year in prime locations, the average occupancy rate has been above 90%, and rents are also higher than the mass market average.

As the market is further institutionalising and developing, investors will be able to deploy capital more efficiently and manage risks effectively. They bring expertise, knowledge, and best practices, which not only contribute to the market’s growth but also enhance the efficiency of business operations within the sector. Institutional investors are known for their long-term commitment, which adds stability and reliability to the market, attracting further foreign direct investment. The inflow of institutional investors has also led to improved standards in development projects. These investors emphasise quality construction, sustainable practices, and modern amenities, raising the bar for the industry. As a result, the market experiences a significant upgrade in terms of the quality and functionality of its facilities, and this will further support market expansion and maturity in Vietnam.

In short, Vietnam’s industrial and logistics market has experienced remarkable growth, fuelled by institutional investments. As the market continues to evolve, the presence of institutional investors will contribute to its expansion, professionalism, and attractiveness to global investors.

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