Hoa Binh Industrial Park in Long An province. (Photo courtesy of hbip.vn)

Investors are increasingly optimistic about the region's potential, driven by a combination of strategic location, infrastructure development and growing demand for industrial space, its research has found.

While investors have taken a cautious approach in 2024 due to external factors, there are encouraging signs of resilience.

The supply of both factories and warehouse has continued to increase, rising by 2% quarter-on-quarter (approximately 92,000 sqm) for ready-built factories and 3% (approximately 174,400 sqm) for ready-built warehouses.

This expansion has been accompanied by a marginal increase in asking rents, indicating growing confidence in the long-term prospects.

Alex Crane, managing director of Knight Frank Vietnam, said: “It is positive to see continued construction of ready-built factories, enhancing occupiers’ choice when considering Vietnam as a destination to start or expand operations.

“Landlords are competing with each other, which invariably creates a good environment for occupiers and encourages growth.

“The range of products now available is significant and includes developments with environmental accreditation, which makes Vietnam more aligned with global supply chain requirements.”

He pointed to some challenges faced by the warehousing market such as increased supply and lower demand, but underscored his belief that the overall outlook in the medium- and long-terms for industrial property in southern Vietnam remains positive as higher quality buildings are available at relatively affordable prices.

“Our house view is that with the 2024 elections out of the way in much of the world, particularly in the US, we might have a clearer flight path for export needs in 2025, and thus more demand for warehousing in the south of Vietnam.”

The industrial park sector has also shown signs of growth, with net absorption reaching 83 hectares in Q3, a 14.7% increase quarter-on-quarter though down 36.6% from a year earlier.

Key provinces like Long An, Ba Ria – Vung Tau and Binh Duong have emerged as hotspots for investment, attracting businesses in various industries.

The development of new industrial parks, such as the upcoming Nam Tan Lap IP in Long An, is expected to further enhance the region's appeal to investors, the company said.

Looking ahead to 2025 it said the market is expected to rebound significantly.

The completion of delayed projects, coupled with increased investor confidence, is expected to drive demand for industrial space, it said. The region's strategic location, infrastructure improvements and favourable government policies would continue to play a crucial role in attracting foreign direct investment and fostering economic growth, it added./.