Vietnam welcomes great opportunities from the US and China, industrial real estate is booming?

Vietnam has a historic opportunity to break out as the US and China race for influence in key regions. Industrial real estate is the first sector to benefit.

Positive signals At the beginning of the new year, the stock market continued its upward trend. Industrial real estate stocks traded quite actively after a year of price breakthrough in 2023. Foreign direct investment (FDI) in 2023 also increased sharply. Vietnam's industrial park real estate market is assessed to be in a vibrant period and has brighter prospects than ever in the context of the two superpowers, the US and China, racing to create influence in important regions, including an Asia that is expected to make a breakthrough, including Vietnam. The comprehensive strategic partnership between Vietnam and the US was established in September 2023 and the policy of building a Vietnam-China Community of Shared Future promises to bring many opportunities for economic development. In a recently published report, SSI Securities said that the demand for industrial park (IP) land lease will be positive in 2024. Accordingly, the demand for land lease in IPs in the North is expected to increase thanks to the trend of shifting production facilities from China to Vietnam, mainly in the electronics and semiconductor industry. As of September 2023, according to CBRE, Apple has 11 audio equipment manufacturing facilities in Vietnam and Apple suppliers such as Lux Share, Foxconn, Compal and GoTek are operating 32 factories in Vietnam. Meanwhile, IPs in the South may record a recovery from a low base in 2023, with the main land tenants in the manufacturing sector (textiles, wood, footwear), logistics and food and beverage. SSI said that many industrial park investors have signed memorandums of understanding (MOUs) on leasing industrial land with new customers in the second half of 2023. Most likely, these MOU contracts will be converted into official contracts and revenue will be recorded in 2024.

In fact, opportunities from agreements with China exist after Xi Jinping's visit in late 2023. One of the main points mentioned during the visit was Chinese enterprises investing in Vietnam. In addition, China has a large amount of capital and wants to invest abroad within the framework of the global infrastructure initiative. This is also an opportunity if Vietnam knows how to use it effectively. Recently, Vietnamese enterprises have taken advantage of the opportunity to promote Chinese enterprises to invest in domestic industrial parks. In September 2023, many enterprises such as Hanaka Group, Videc, Phuc Loc, ... attended a conference in Shenzhen to promote trade investment between large industrial parks in Vietnam and Chinese enterprises. For the US, the comprehensive strategic partnership brings many new opportunities, along with the trend of shifting production out of China, the US is targeting Vietnam in many fields such as semiconductor electronics, minerals for semiconductors, digital infrastructure, energy, infrastructure and logistics... Industrial real estate enterprises are favorable. It can be seen that the opportunity to attract foreign direct investment (FDI) is huge. Meanwhile, the supply of industrial real estate is limited. This is a favorable factor for businesses in this field, typically Kinh Bac Urban Development Corporation (KBC) of Mr. Dang Thanh Tam. In 2023, KBC cleared all bond debt, and at the same time promoted the expansion of land area to attract foreign capital. Mr. Dang Thanh Tam's company also expanded its land fund in the North to welcome FDI waves from Korea and China. At the end of 2023, KBC was approved for the 1/2000 planning of Trang Due 3 Industrial Park (Hai Phong). In the South, KBC is preparing to invest in an additional industrial park in Hau Giang with a total capital of more than 5,500 billion VND. Like KBC, Sonadezi Chau Duc (SZC), Idico Corporation (IDC), Viglacera (VGC) ... also recorded many positive developments. Profits and shares increased sharply last year and are forecast to continue to be positive in 2024. According to SSI Securities, with the limited supply of industrial park land for lease, land rental prices of listed industrial park investors are forecast to increase by an average of 15.5% in 2024. In 2024, the supply of industrial parks is still limited due to difficulties in land valuation, auctions to convert agricultural land into industrial park land and compensation for site clearance. New industrial parks can come into operation after 2-5 years after being approved by the Prime Minister. According to Bloomberg, industrial park rental prices in Vietnam compared to other countries in the Southeast Asian region have narrowed; However, it is still 21% lower than the average rental price of industrial parks in Indonesia - the country with the highest correlation with Vietnam among ASEAN countries. The profits of listed industrial real estate enterprises are forecast to have clear differentiation in 2024, but overall will increase by about 9.3% compared to 2023. Some enterprises, according to SSI, may record outstanding growth such as Nam Tan Uyen (NTC) with an estimated after-tax profit increasing by 135% compared to 2023 to VND 545 billion. Meanwhile, IDC is estimated to have a pre-tax profit increase of 43% to VND 2,400 billion. By the end of 2023, the profit/earnings (P/E) and price/book value (P/B) ratios of industrial park investors will be 14.8x and 2.75x, respectively. This is the highest level since 2019 due to the sharp increase of 24% in shares of enterprises in this sector in 2023, compared to the increase of 12.1% of the VN Index. In 2023, SZC shares doubled, IDC increased by 80%, KBC increased by 31%... On the contrary, the industrial park industry may face some difficulties in 2024 such as: the global minimum tax applied from January 1, 2024 will reduce attractive tax incentives for tenants in industrial parks (including exemption of corporate income tax in the first 2 years of operation, 50% tax reduction in the next 4 years); the competitive advantage in rental prices in industrial parks in Vietnam and the Asian region is gradually decreasing; investment costs for new industrial parks are estimated to be higher due to high land prices and prolonged land acquisition process.

In 2023, FDI disbursement in Vietnam reached 23.2 billion USD, up 3.5%. In addition, total committed FDI capital in 2023 reached 28.1 billion USD, up significantly by 24.4%. FDI capital is expected to continue to maintain growth in 2024. According to CBRE, the occupancy rate of industrial parks is expected to increase in 2024. According to the Ministry of Planning and Investment, in 2023, 413 industrial parks were established with a total land area of ​​120,000 hectares. Of which, 295 projects are in operation with a total area of ​​over 92,000 hectares. The occupancy rate in domestic industrial parks is about 72.9% (compared to 71.9% in 2022).

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