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  • Writer's pictureBjörn Koslowski

Industrial Invest: Deep Dive on Plant/Land Lease Forms

Updated: Apr 29

One of the first things investors need to consider when starting up a manufacturing operation is what kind of real estate they want to utilize. In Vietnam, there are three options: Ready-built-factories, built-to-suit-factories and brownfield investment. Withing this article, we will introduce these real estate forms and lay out how German investors are utilizing them.

Please note that this article is part of a sponsored roadshow happening in December 2023. More details below.


These are basically production halls that can be rented by investors. RBFs only entered Vietnam a couple of years back when major (mostly foreign ) investors started developing them on large scale; often in cooperation with local partners. These real estate developers lease lease from industrial zones, build the RBFs and then rent them out to manufacturing investors. Hence, they are also called "second developers". These production halls are mostly build up to global standards and thus offer a very high building quality. Depending on the operations pursued by the investor, often only minimal fitting-out has to be added. RBFs may thus be considered "plug-and-play".

For investors, RBFs nowadays can be considered a "hot topic". Many projects are let out within just a couple of months after completion. This strong demand is based on the following benefits of RBFs:

  • Short lease terms: With lease terms of typically three to five years, new investors can easily test Vietnam as a manufacturing location with minimum exposure.

  • Small plots: For many companies only a couple of thousand square meters in production floor space suffice. In contrast to brownfield investments mostly involving leasing larger land plots RBFs often already start at 2,000 sqm (sometimes even less). This makes them attractive not only for companies testing the market but also for those generally aiming for a smaller footprint.

  • Low capital tie-up: Instead of "investing into bricks", investors can save capital expenditures by renting RBFs. In many cases, such low needs for cash expedite decision-making processes at headquarters.

  • Superfast SOP: While it may take years to design and construct a brownfield project, an RBF can achieve start of production (SOP) within just eight to twelve months. For many companies this is the defining factor in the decision for RBFs as the real estate form of their choice.

While for many investors a strong case can be made for RBFs, they also provide some major disadvantages:

  • Low flexibility: Apart from some minor adjustments such as internal fitting-out or amendments to floor loads the design of RBFs generally cannot be amended much. Hence, companies with very specific production processes may not be able to utilize this real estate form.

  • Options for expansion: As pointed out above RBFs are currently "selling like hotcakes". Hence, it may be very hard to expand an RBF-based operation next door in the same industrial development. There are possibilities to agree on "rights of first refusal" with the developer but depending on the concreteness of the investor`s expansion plans it may be difficult for her to actually interfere in time.

  • Costs: At the time of writing rental fees at RBFs mostly lie between 5 and 6 dollars per square meter per month. These costs are often inflated by stepped rents with yearly increases of 3 to 5%. Hence, RBFs may turn out a capital-light but ultimately expensive solution.


While RBFs are quite inflexible leasing options, BTS are factory halls that are built by industrial zone developers according to the specific needs of the investor. For example, warehouse operators or chemical companies may consider choosing BTS over RBF. After completion of the building, the investor will lease the BTS. This real estate form is suited well for manufacturing process with very specific needs regarding facilities.

In comparison to RBFs at BTS rental terms are longer (see above), facilities must be built to spec so SOP is not as fast and land plots might have to be larger as BTS are usually built on "normal" brownfield industrial land.

Nevertheless, BTS provide the following unique benefits:

  • Low capital tie-up: Instead of "investing into bricks", investors can save capital expenditures by renting RBFs. In many cases, this expedites decision-making processes at headquarters.

  • Fast construction: The BTS industrial zone developer (often also active in construction) may have considerable experience in setting up manufacturing sites and excellent connections to local decision-makers. Hence, construction of the buildings should work out more smoothly and rapidly than being done by a "newcomer" investor from abroad.

However, BTS also come with a couple of caveats:

  • Costs: Same as RBFs BTSs may turn out a capital-light but ultimately expensive solution.

  • Long rental terms: As BTS are tailored to the specific needs of the tenants, industrial zone developers cannot just rent them to any client. Hence, rental periods are typically quite long; typically between 10 and 15 years.

Overall, BTS are occupying an important niche in industrial real estate which nevertheless is quite limited in its actual scope of implementation. They are a go-between between RBFs and brown-field investments.


The classic. Most brownfield investments will be made at privately owned industrial zones. There are over 300 of these in Vietnam. Many are locally developed while an increasing number is invested from abroad. Industrial land, as all other land in Vietnam, can only be "leased" not "owned" because, same as in China, all land belongs to the state. It is typically available for lease for up to 50 years which should be plenty of time to amortize any investment. Usually, but depending on each industrial zone, roughly 60 to 70% of a land plot can be utilized for factory buildings while the rest should stay "green".

Brownfield investments carry the following benefits for investors:

  • Low long-term costs: In the long run, costs for these investments will likely be lower than for factory rental via RBF/BTS. Costs for land plots however vary immensely by region starting with EUR 50/sqm in central Vietnam, EUR 100 to 150 between Hanoi and Haiphong and going as high as EUR 200 around HCMC, with the latter being the most developed industrial region of the country.

  • High flexibility: Of course, investors can construct factories to their own specifications free of any restrictions pre-existing buildings would pose.

  • Lots of space for expansions: Should investors want to expand their holdings they can simply "buy" a larger land plot than initially needed and then expand based on their demand and timeline.

However, brownfield investments also come with a couple of disadvantages:

  • High capital tie-up: Naturally, "buying" land and investing into the construction of factory buildings comes with very high capital expenditures. As laid out above, this nowadays is a big issue for many investors; especially in a high-interest rate environment.

  • Long SOP lead time: Decision-making, obtaining permits and the subsequent construction process take a long time. SOP may thus take two or three years to achieve. For investors with tighter timelines this may be a major issue.

Overall, investors with larger investments in volume and/or plot size tend to choose brownfield investments. A line between RBF/BTS and brownfield may be roughly drown at 5 million EUR in investment volume and 10,000 sqm of factory size but finally heavily depends on a company`s strategy.

Overview: Industrial real estate forms


You may be wondering why this deep dive does not elaborate on greenfield. Reason for this is that there are simply no such investments from Germany in Vietnam. All the investments we are aware of are within the above-mentioned real estate forms. Greenfield seems to much of a stretch for foreign investors in regards to obtaining land and connecting it to infrastructure (e.g. streets, electricity, water).


Currently, there are about 500 enterprises from Germany in Vietnam of whom a bit less than 100 are invested in production facilities. The vast majority of these enterprises is active with brownfield manufacturing facilities. See the graph below.

Share of real estate forms at German production investments (Status: May 2023)

However, with the above-mentioned advent of modern RBF providers this real estate form has sparked strong interest by investors. Of the 28 plants set up between 2018 and 2022, 15 have been RBF while 13 have been brownfield. It is foreseeable that this trend will continue in the future as many companies are aiming for capital-light and fast setups.

Accumulated number of brownfield and RBF projects at German investors between 1992 and 2022

It remains to be seen how the number of brownfield and RBF projects will develop in the coming years. Many investors cite that they are aiming to utilize RBFs for the start of their activities in Vietnam. They basically "test" the investment market with plans for larger operations in the future. This could mean that RBFs will be used as stepping stones on the way to large-scale brownfield investments.


If you would like to know more about the Vietnamese industrial investment environment we would like to invite you to join our upcoming "Germany Roadshow" in December 2023. It is powered by the following partners that will inform you on legal and HR topics as well as on industrial zone properties.

  • AHK Vietnam

  • Luther Law Firm

  • Contagi JP

  • Deep C Industrial Zones

  • Phu My 3 Specialized Industrial Park (PM3SIP)

  • Vietnam-Singapore Industrial Park (VSIP)

  • BW Industrial

The roadshow dates are as following:

Looking forward to seeing you there!

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