Manufacturing investments bolster Vietnam's real estate performance

Despite the global economic slowdown, Vietnam's real estate performance remains robust with significant appeal for foreign manufacturing investors, property services firm Savills said in its Asia Pacific Investment Quarterly Report.

Registered foreign direct investment (FDI) in Vietnam totaled $25.76 billion in the year to October 20, up 14.7% year-on-year, according to government data. Of the total, newly registered FDI jumped 54% to $15.29 billion.

In addition, the government has implemented monetary policies to promote macroeconomic stability, while public investment spending rose 22.6% year-on-year to VND479.3 trillion ($19.6 billion) in the 10 months through October. Exports have risen steadily since April 2023, with a notable 5.3% month-on-month increase in October.

Inventories in the U.S, fell to 10% in August, which is favorable for manufacturing demand as the U.S. is one of Vietnam's largest trading partners, according to Savills.

Meanwhile, industrial real estate continues to underpin real estate investment. In July, Japan’s Sumitomo Group signed an MoU with Thanh Hoa province to develop a 650-hectare industrial park with a $400 million investment. They are also exploring a 300-hectare industrial park in Nam Dinh province.

As of end-August, three new Vietnam-Singapore Industrial Park (VSIP) projects commenced, two received investment approval, and 12 signed development cooperation agreements.

A joint venture between Lineage Logistics and SK Logistics was announced on August 11 to enhance and expand Vietnam's cold storage system. In July, Suntory Pepsico received approval for a new factory in southern Long An province with an investment of $185 million, while Hyosung Group has plans to invest nearly $1 billion in a carbon fiber factory in Vung Tau.

Meanwhile, regarding the residential segment, given a scant supply, investors who can successfully bring projects to market will likely tap into the strong underlying demand, particularly if they target owner-occupiers in the growing middle class, said Neil MacGregor, managing director of Savills Vietnam.

Prominent residential developers, including Vingroup, Masterise Homes, and Ecopark, introduced new products for sale toward the end of the third quarter.

In Ho Chi Minh City, continued strong performance, despite new Grade A supply, will mean opportunities remain for office investors and developers. “Those who can deliver, or reposition, office buildings with green credentials could attract rental premiums,” commented MacGregor.

The amended Housing Law, expected to be approved at the ongoing National Assembly session, will eliminate the regulation that requires commercial housing developments to reserve 20% of their land for social housing. This change is expected to expedite projects for developers, the Savills report noted.

“Manufacturing, trade, and services will continue to drive Vietnam’s economic growth while real estate M&A activity is increasingly vibrant. The State Bank of Vietnam has continued to chase down interest rates to 2020 levels, a good sign for residential property,” Troy Griffiths, deputy managing director of Savills Vietnam, commented.