At the recent Vietnam Industrial Estate Forum 2022, most of the speakers said that the potential in Vietnam's industrial real estate is still very large. In particular, two main segments that will be exploited are land leasing and ready-built factory rental.
Experts of Viet Dragon Securities Joint Stock Company (VDSC) expect that the land rental price will continue to increase. There are two reasons behind the increase. Firstly, the demand is still increasing while the supply is somewhat limited. In addition, the cost of compensation as well as the annual increase in land rent lease also contributes to the increase in rental prices.
In this context, VDSC believes that industrial real estate investors who have available land funds for site clearance compensation and land use fees will benefit thanks to low costs while rents gradually increase.
According to this company, Vietnam's e-commerce development potential is still very large, with a low penetration rate and high growth. Currently, the penetration rate of e-commerce in total retail is only 5.5%, which is equal to that of China 10 years ago. Therefore, experts highly appreciate industrial park real estate businesses that plan to develop ready-made factories and have available land in the vicinity of urban areas.
According to data from CBRE, the average rent in some areas recorded an increase of over 10% in the fourth quarter of 2021. Industrial park projects within an hour's commute to the city center saw rents increase from 17% to 32%. Similarly, the supply shortage also occurred in the Northern region. In the long term, the Northern region is forecasted to continue to benefit from the "China +1" policy of multinational manufacturing corporations.
In its recent report, BIDV Securities Joint Stock Company (BSC) also expects the industrial real estate market in the South to be "unlocked" this year, especially in Binh Duong and Dong Nai where the occupancy rate is over 90% and no more industrial zones have been approved for investment in the period of 2020 - 2021.
BSC forecasts that Vietnam's resumption of international flights and the application of a vaccine passport alongside efforts to attract FDI will help industrial real estate to benefit and grow stronger in 2022.
Specifically, the market will remain positive thanks to a number of factors such as limited supply and recovery in demand. Moreover, production and business activities are no longer interrupted due to the epidemic. Legal issues are resolved to help businesses deploy to meet demand and ultimately, the prospect of improving transport infrastructure is accelerated in the medium term.
Ms. Trang Bui, General Director of Cushman & Wakefield Vietnam, said that in the 2017-2018 period, foreign capital inflows into Vietnam's real estate industry focused mainly on residential real estate. However, in the past two years, this capital flow has clearly shifted to the industrial real estate segment. For example, in the first quarter of 2022, the total value of industrial real estate transactions in Hanoi accounted for 28% of the total transaction value.
She also said that in the past 5 years, industrial real estate has been among top 5 fields with large transactions in investment. In particular, Bac Ninh, Binh Duong, Dong Nai, Ba Ria - Vung Tau, Long An are currently 5 provinces with strong investment in industrial real estate and logistics centers.
Industrial park developers in Vietnam have also recorded a strong growth in recent times. Currently, there has been a capital flow of about USD 2 billion into Vietnam to build infrastructure for industrial parks and logistics. The stability of the Vietnamese currency compared to other countries in the region is also one of the attractive factors for foreign investors.
According to Ms. Trang, investors are currently concentrating mainly in the South and the North. In particular, the North is benefiting from its location (near China). There have been many big manufacturers like Foxconn that are setting up factories and will continue to invest in Vietnam. In addition, in the North, very high-valued production chain has been formed.
In the southern region, major markets such as Ho Chi Minh City, Dong Nai and Binh Duong do not have much land to attract large manufacturers. However, other markets such as Tay Ninh, Long An, Ba Ria - Vung Tau still have a lot of land and potential for further development.
According to this expert, FDI capital in Vietnam is mainly in two fields, one is manufacturing and the other is real estate. There are many capital sources from Singapore, and European investors are now also very interested in Vietnam.
“With the EVFTA Agreement, billions of dollars have been committed to be poured into Vietnam. Some large investors currently based in China may soon expand to Vietnam." said Ms. Trang.
Compiled by VietnamCredit