Industrial real estate equities might shine by year-end

Situation in 1H23

According to Mr. Pham Hoang Quang Kiet, an expert from the FIDT Analysis Research Department, the northern industrial real estate sector in Vietnam is thriving once China reopened. This was reflected in the considerable rise in queries from Chinese renters for industrial property, warehouses, and factories in the first six months of this year.

According to CBRE, there has been a 33% surge in industrial site leasing requests from Chinese clients. Large firms, like as Foxconn and Goertek, expanded particularly in industrial zones in Bac Giang and Bac Ninh.

Furthermore, rental costs in the United States have continued to grow. Despite the adverse economic conditions in the first half of the year, foreign enterprises, particularly from China, continued to participate and expand in the electronics, information technology, telecommunications, and high-tech industries.

Vietnam as an attractive destination

Competitive Advantages Compared to Other nations in the Region: Due to strong competitive advantages compared to other nations, Vietnam will remain very appealing to international enterprises in the long run. These benefits include cheap initial investment costs as a result of inexpensive land leasing and building costs, competitive labor costs supported by a youthful and competent workforce, and different government incentives for international enterprises.

Furthermore, government attempts to improve transportation infrastructure would boost the country's future competitiveness.

Improving the Legal Framework: Over the last 30 years, the development of industrial zones and economic zones in Vietnam has contributed favorably to the country's economic growth and social development. However, there have been limit ations, mostly linked to poor planning, delayed development, inadequate depth in attracting investment, limit ed collaboration and linkages amongst industrial zones, and sustainability concerns in the economy, environment, and society. The passage of a comprehensive law is required to provide a uniform legal framework that promotes a favorable economic climate and increases investment and output. The draft law for industrial and economic zones is now being reviewed and is likely to be passed by the National Assembly during its 7th session (May 2024).

Long-term benefits

The improvement in diplomatic ties with the US is projected to generate long-term economic impetus for Vietnam's IRE enterprises. This includes the expectation of increased FDI inflows from the United States into Vietnam as more American firms invest in the nation. The diversification of supply chains out of China, especially in the electronics and technology industries, is driving rising demand for industrial zones.

Vietnam's geographical advantage, strategic placement along global trade routes, skilled labor force, and reduced labor costs relative to other regional nations and China continue to make it an appealing destination. Certain sectors, however, require upgrading, such as a skilled workforce, particularly in electronics engineering, transportation infrastructure, and a reliable national power supply.

The improved diplomatic relations with the United States are likely to stimulate future growth for IRE enterprises, along with the trend of supply chain diversification and greater investment in Vietnam by multinational American corporations.

Long-term rental price trends

Vietnam's industrial land prices have been continuously growing in recent years, and CBRE forecasts that both rental prices and supply of industrial real estate will continue to rise in the future.

In comparison to other nations, Vietnam has significant competitive advantages, making it an appealing site for foreign firms. In the near term, the closing months of the year are when most IRE firms will transfer over land to partners and post higher sales than earlier in the year. Positive news such as the increasing trend of FDI disbursement in the final months of the year, the National Assembly's examination of the industrial zone and economic zone laws, and prospective new policies can all have an immediate influence on stock prices.

Furthermore, FIDT has chosen the IRE sector for investing in the last months of the year, with LHG, IDC, and KBC stocks projected to profit greatly.