Breakthrough in luring FDI into industrial real estate

The "leveraging" policy to attract new capital

According to the Ministry of Planning and Investment, realized FDI would reach roughly 22.4 billion USD in 2022, the highest level in the previous five years. In the first seven months of 2023 alone, newly registered FDI capital and the number of newly approved FDI projects surged by 38.6% and 75.5%, respectively, indicating international investors' high trust in Vietnam's investment climate.

Mr. Tran Quoc Phuong, Deputy Minister of Planning and Investment, stated at the 2023 Vietnam Industrial Real Estate Forum that due to advantages in an export-oriented economy with numerous supportive policies, strategic geographical location, and favorable operating costs, Vietnam is still regarded by experts as an appealing destination for investors to consider and choose for investment. However, because manufacturing is the primary development engine for the majority of Southeast Asian economies, nations in the area are all attempting to attract significant high-value FDI into the manufacturing industry. As a result, the market will continue to encounter hurdles in the future.

Amid fierce competition to attract FDI, particularly among countries in the region focusing on boosting investment to drive economic recovery following the Covid-19 pandemic, Vietnam has developed a number of strategies and policies to improve the effectiveness of attracting foreign investment, both domestically and internationally.

The National Assembly passed Resolution No. 81/2023/QH15 on the national development plan for the period 2021- 2030, with a vision to 2050, on January 9, 2023. This plan precisely explains the development perspectives and spatial organization for the period 2021 - 2030, looking ahead to 2050, and defines the economic and social space development direction for the 06 economic and social areas nationally. This is an excellent chance to plan and rearrange the economic and social development space. As a result, it encourages focused and strategic investment attraction based on exploiting potentials and benefits.

In addition, the government has released the Foreign Investment Cooperation Strategy for the period 2021- 2030, as well as the Action Plan for implementing the Strategy, with general objectives such as attracting foreign investment projects that use advanced technology, new technology, high technology, modern management, have high added value, positive spillover effects, and global supply chain connectivity. Increasing market size and competitiveness of the economy, enterprises, and domestic products. Improving overall efficiency and quality in recruiting and employing foreign investment capital; improving the participation ratio of foreign investment in socioeconomic development in proportion to the advantages and assistance received.

"To achieve the above-mentioned objectives, one of the important solutions to implement is to establish mechanisms, policies for industrial zones and similar models with a clear focus on development orientation and superior mechanisms and policies suitable for the characteristics of each model, ensuring linkage and coherence with other areas," Deputy Minister Tran Quoc Phuong emphasized.

Riding the wave of industrial real estate investment

Currently, a system of more than 400 industrial zones has been built across the nation, with a total natural land area of over 128,000 hectares and an industrial land area of over 86,000 hectares. Infrastructure, workshops, and international quality standards have been completed in industrial zones. In certain areas, experimental clusters of interconnected industries have been established to build production networks, supply chains, and wider engagement in the global value chain.

According to data from the Ministry of Planning and Investment's Department of Foreign Investment, by the end of July 2023, foreign direct investment (FDI) into Vietnam had reached 13.43 billion USD, with the real estate industry attracting 1.53 billion USD, placing third among sectors.

The increased FDI flow has increased demand for industrial zone real estate. According to the Ministry of Construction's report for Q2/2023, demand for renting industrial zone workshops remained consistent throughout the quarter. Some regions, such as Bac Giang, Bac Ninh, Quang Ninh, Nam Dinh, and Hai Phong, have seen a minor boost in demand as a result of contracts signed with various international partners in early 2023.

Significantly, the occupancy rate in existing industrial zones in the Northern area is over 80% and over 85% in the Southern region. Furthermore, the average land rental rate in industrial zones for the full lease duration in Q2/2023 remained consistent compared to the previous quarter and climbed by roughly 5 - 7% compared to the same time last year.

Many experts anticipated during the 2023 Vietnam Industrial Real Estate Forum that, with global inflation clearly falling, Vietnam will have greater flexibility for macroeconomic management and regulation. This will encourage FDI inflows to recover swiftly, particularly in the second half of 2023 and 2024. Many foreign investors continue to prioritize Vietnam in their attempts to diversify supply sources and increase production and company sites in order to remain ahead of the rebound wave. The demand for industrial real estate in Vietnam will continue to rise fast.

Investors from various countries and territories will have different goals and requirements, but core issues such as infrastructure, administrative procedures, legal frameworks, policies and regulations, labor productivity, local supply chain connectivity, and so on are critical. Many investors are increasingly demanding higher criteria for technological infrastructure and worker capacity, a diverse range of industrial real estate goods linked to comprehensive logistics services, and utility connectivity to support satellite firms. Transitioning to complex eco-friendly industrial zone models adhering to the highest ESG (environmental, social, governance) standards, or industrial zones with comprehensive and modern logistics services, ensuring the economic efficiency of the production scale targeted by investors, is a strong trend.

Opportunities for specialized industrial real estate products such as ready-built warehouses (RBW), ready-built factories (RBF), built-to-suit factories, cold storage, logistics (post-logistics warehouses), last-mile logistics services, data centers, and more are also highly valued by experts and businesses.