Accelerating the Green Transition in Vietnam’s Industrial Sector
Sustainability commitments as key driver to develop “greener” projects in attracting high-profile tenants.
- Trang Le
- Ha Ngo
HO CHI MINH CITY, August 26, 2024 – Vietnam is strongly positioned to become a regional leader on sustainable industrial real estate development. According to Jones Lang LaSalle (JLL) Vietnam new report titled "From Vision to Action: Accelerating the Green Transition in Vietnam’s Industrial Sector" Vietnam's industrial market dynamics, favourable demographics and ongoing green initiatives, will serve as a catalyst for actionable sustainability transitions in the sector.
With strategic geographical advantage, Vietnam is poised to significantly benefit from the China Plus One (China +1) strategy. The country’s foreign direct investment (FDI) grew at a compound annual growth rate (CAGR) of 10% from 2010 to 2023, outpacing the ASEAN average of 7.6% (including Indonesia, Philippines, Malaysia, Thailand, Vietnam) and contrasting with a contraction in China of -3.8%.
Sustainability and economic Initiatives
With a commitment to achieving net-zero carbon emissions by 2050, as declared at COP26, Vietnam is advancing its roadmap towards a Carbon Neutral economy. Key action groups include increasing renewable energy use, enhancing energy efficiency, and promoting electric transportation. The industrial sector leads in obtaining green building certifications, with over 70% of LEED-certified projects in 2023 being industrial facilities according to U.S. Green Building Council.
Eco-Industrial Parks
As one of effort to go green, Vietnam has released the Decree 35/2022/ND-CP to escalate this transition, of that Eco-industrial park is one of focal point. Currently, the country is piloting some projects with Amata City Bien Hoa and Deep C Industrial Zones demonstrating significant progress in implementing eco-industrial park models. These initiatives focus on energy efficiency, waste recycling, and renewable energy use, achieving substantial environmental and economic benefits.
Trang Le, Head of Research & Consulting at JLL Vietnam, said, “Vietnam's industrial market is at a pivotal moment where embracing sustainability is not just regulatory compliance but a strategic advantage. We are extremely confident that all stakeholders looking to drive sustainable change and seize opportunities in Vietnam’s industrial landscape will also see the business case for green initiatives. JLL stands ready to partner with the market to accelerate this transition."
Vietnam's export growth is projected at a CAGR of 6.8% from 2024 to 2030, while domestic consumption is expected to rise with a CAGR of 6.1% in the same period. The e-commerce sector experienced a CAGR of 33.8% from 2019 to 2023, marking it as one of the fastest-growing markets in the region.
Another driving factor in attracting investment in logistics and industrial development is the country’s highly educated workforce, with 87% of the working-age population having advanced education, the second highest in the region. Additionally, the average manufacturing wage is approximately 34% of China's, enabling Vietnam to capitalize on the China +1 initiative.
Market Dynamics
Established itself as an export-driven Vietnam is currently home to 12,254 ha and 28,251 ha of industrial land in the North and the South, respectively, allowing the country sufficient land resource to capitalize on the incoming demand.
The strong presence of institutional investors in recent years makes Vietnam Industrial and logistics one of the fastest institutionalizing markets in the region, suggesting potential improvement in the stability, standardization and transparency of the market. The ready-built factory market has showed solid performance amid the current economic headwind, driven by growth in the manufacturing sector and foreign investment. Meanwhile, the ready-built warehouse sector, after a period of robust growth, is currently stabilizing, supported by domestic consumption and storage demand from the manufacturing sector.
As industrial and logistics market develop quickly, the market also attracts attention to new alternative assets such as data centers and cold storage. Vietnam is well positioned as a favourable location due to economic and demographic factors.
Learn more in JLL Vietnam's reports (English & Vietnamese)
