Renting a ready-built factory and leasing land to build your own are two roads to the same plant with completely different financial structures. An honest 10-year comparison does not stop at ‘rent per square metre’: it must add capital cost, depreciation, the opportunity cost of construction time and the residual value of assets on land at year ten — the year the two options usually swap their cheap and expensive positions.
The 10-year cost components of the two options
- Ready-built rental: pure operating cost — rent per m2 times area and time, industrial park management fees, the deposit and reinstatement cost at term end; no fixed asset to depreciate and no asset-on-land value when leaving, but production starts almost immediately.
- Land lease and self-build: capital cost plus an asset — land rent (one-off for the whole term or annual, under Land Law 31/2024/QH15 and the infrastructure developer contract), factory construction capital, design and building permit costs, and construction-period interest — in exchange for company-owned assets on land that depreciate and can be transferred.
- Depreciation and tax drive the cash-flow gap — a self-built factory depreciates under Circular 45/2013/TT-BTC frames (permanent structures 25-50 years), creating deductible cost that lowers corporate income tax; factory rent is a fully deductible operating cost per period but creates no asset.
- The often-forgotten time factor — self-building adds roughly 12-24 months from design to operation (by scale and investment, construction and environmental procedures): lost revenue and opportunity cost in this window must be quantified in the comparison, especially for short-market-window products.
A decision frame between the two options
- Build 10-year cash-flow models for both options on shared output and rent-inflation assumptions, including lease-renewal and year-ten asset-on-land disposal scenarios.
- Identify the flip points: the group’s real intended stay in Vietnam, expansion needs, and special technical factory requirements (height, floor load, cleanroom) that ready-built stock cannot meet.
- Negotiate both options in parallel to the final round so the model runs on real prices — comparisons using published reference rents usually skew the conclusion one way.
There is no universal right answer to rent-ready versus self-build — only the right answer for one specific production plan. FDI companies that model the full ten years with construction time and asset-on-land value, then decide on real negotiated prices, choose the option that is cheaper in true economic terms — not the one that merely looks cheaper on a rent table.
Frequently asked questions
Which is cheaper: renting ready-built or leasing land to build?
In the first years ready-built rental is usually cheaper and faster; self-build gains advantage with longer use thanks to assets on land and depreciation — the break-even depends on land rent, factory rent and project life, and must be modelled on real numbers.
What does the 10-year cost include?
Ready rental: rent, management fees, deposit, reinstatement. Self-build: land rent, construction capital, design and permits, construction interest, maintenance — minus residual asset-on-land value and depreciation benefits.
When should we self-build?
When production needs a specialised factory ready stock cannot provide, the stay is long-term (often 10+ years), expansion is planned and holding transferable assets on land matters for exit.
This article has been quality-reviewed by the FLAW AI Legal Council
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