Industrial real estate will continue to be popular this year

This is the forecast of many units about the industrial real estate market in 2024. According to CBRE, last year, industrial real estate achieved positive results despite the Vietnamese economy facing many challenges. The Northern region recorded an occupancy rate of over 80%, while the Southern region was about 92%.

Of which, the absorption area in the Northern market reached the highest level in the past 5 years, exceeding 800 hectares, up 37% over the same period last year. The Southern market, due to relatively limited industrial land fund, had an absorption area 32% lower than the same period in 2022, reaching about 500 hectares.

In addition to electronics, automobile and accessories manufacturers, CBRE has seen tenants from new high-tech industries such as electric vehicle manufacturing, semiconductors and green materials also showing interest in Vietnam. "The direction of provinces and cities and the increasing interest of businesses in high-tech and sustainable industries will drive future demand," the unit said.

On that basis, CBRE estimates that in the next 3 years, industrial land rental prices may increase by 5-9% per year in the North and 3-7% per year in the South. Rental prices for warehouses and ready-built factories may also increase slightly, at 1-4% per year.

According to the Ministry of Planning and Investment, by the end of the third quarter of 2023, the country had 413 established industrial parks with a total area of ​​over 87,700 hectares, an increase of 3 parks compared to 2022. MB Securities Company (MBS) said that by the end of last year, the average industrial park land rental price was 123 USD/m2/rental period in the North, while in the South the average rental price was 167 USD.

SSI Research believes that industrial real estate will also have a positive outlook thanks to FDI inflows into Vietnam continuing to maintain growth this year. Last year, domestic FDI disbursement reached 23.2 billion USD out of a total of more than 28 billion USD committed, up 24% compared to the previous year.

In the North, according to SSI Research, demand for industrial park land rentals may increase this year due to the need to shift production from China to Vietnam, mainly in the electronics and semiconductor industries. In the South, industrial parks may recover thanks to tenants including manufacturing enterprises (textiles, wood, footwear), logistics, food and beverage.

Similarly, MBS Securities Company stated that industrial parks in the North are expected to grow well thanks to the wave of production shifting from China, especially in the semiconductor sector. Notable industrial parks in the next 3 years include Industrial Park No. 5 (193 ha, Hung Yen), SHI IP Tam Duong (162 ha, Vinh Phuc), Song Lo 2 (165 ha, Vinh Phuc), Gia Binh 2 (250 ha, Bac Ninh).

The company predicts that traditional industrial parks will gradually lose their competitive advantage. Instead, industrial parks that focus on green and sustainable factors are increasingly attracting investors. Because investing in high-tech projects using clean materials and reducing carbon emissions is the current trend.

Despite its great potential, the industrial real estate market in Vietnam still faces a number of new challenges. First, according to MBS, is the increasing competition to attract FDI capital from countries in the region. The two biggest competitors with Vietnam today, India and Indonesia, have both recently made strong moves.

In order to attract investment capital after the pandemic, India has allocated 460,000 hectares of land, invested heavily in infrastructure, and exempted taxes for new projects. Many businesses such as Samsung, Pegatron, and Apple are increasing their investment in this country. Indonesia also attracts FDI capital thanks to the electric vehicle battery and cloud computing sectors. The compound annual growth rate (CAGR) of FDI capital inflows into Indonesia in the past 5 years has reached 13% per year, India has reached 9% per year, and Vietnam has only about 4%.

Power shortages during peak production seasons are also a risk for industrial zones in Vietnam. In addition, the application of a global minimum tax from this year also reduces Vietnam's competitive position in attracting investment, affecting large-scale investment sources.