What are the prospects for industrial property in 2023?

Nam Dinh Vu industrial park

>> Creating an "ecosystem" for the industrial park

Revenue growth of listed IP companies

PHR's third quarter of 2018 had flat yoy sales and a 16.1% yoy decline in third quarter of 2018 net profit. Revenue decreased by 11.5% yoy for 9M22 as a result of declines in rubber, wood, and industrial revenue of 8.1%, 30.4%, and correspondingly. Due in part to the land compensation for VSIP III (VND289 billion), 9M22 net profit increased by 53.5% year over year to VND468 billion, only meeting 45% of our FY22F estimate.

Due to the IP revenue dropping by 29.9% yoy compared to the high base of 3Q21 and residential income from Sonadezi Huu Phuoc not being recorded, SZC's 3Q22 revenue reduced by 24.3% yoy. This resulted in a 65.0% yoy decrease in 3Q22 net profit. Due to the increasing demand for IP rentals in 1H22, income climbed by 17.3% year over year for 9M22. Nonetheless, SZC increased the land price in Chau Duc IP as compensation. As a result, 9M22 net profit decreased by 37.5% year over year, barely meeting VNDirect’s FY22F prediction of 42.4%.

Due to a lack of industrial and residential revenue, KBC's 3Q22 revenue fell by 37.5% yoy to VND203 billion, while its net profit soared to VND1,919 billion as a result of a one-time gain from investment revaluation of VND1,975 billion. Then, 9M22 revenue fell by 58.1% yoy to VND1,289 billion while net profit rose by 255.1% yoy to VND2,030 billion.

Thanks to a VND1,300 billion Uni Galaxy transfer, BCM recorded a 156.4% year-over-year increase in 3Q22 revenue to VND2,264 billion. Due to the poor gross margin of the Uni Galaxy project of c.14%, the 3Q22 gross margin was suppressed by 25.1% points yoy to only 29.8%. As the charity contributions were made during COVID-19, 3Q22 net profit increased 318.4% yoy to VND203 billion on a low basis for 3Q21. Total 9M22 revenue/net profit increased by 41.3% yoy to VND5,634bn and 58.0% yoy to VND1,577bn, respectively.

>> Many new regulations in the industrial park management policy

A scarcity of new supply

No plan to build further industrial parks in the Southern or Northern markets has been documented since 1Q22. Additionally, the national IP master plan can only accommodate a certain number of new IPs.

This is due to the industrial park development plan still being implemented, which mostly depends on local government decisions. Therefore, the approval process for many projects has been delayed as a result of the recent turnover in top leadership in numerous localities. As a result, land clearance took longer than anticipated, and overlap in infrastructure or planning occurred outside of IP.

“From now through the end of 2023F, there will likely be a shortage of new supply in the industrial property market. Only 700ha, largely from Long An and Dong Nai, will be put into operation in Southern during 2023–26F after the supply surge in 2022. Despite the large number of unfinished projects, we predict that the scarcity of fresh supply in the Northern market will not end before 2023F. After that, we anticipate that around 4,500 ha will be put into operation between 2024 and 2026F, with Bac Ninh and Hai Phong contributing the most”, said VNDirect.

However, VNDirect said a strong new supply of warehouse (WH) and ready-built factory (RBF) will be put into operation in next four years in both Northern and Southern market. For Northern market, new supply will lead to impressive growth in total supply of WH and RBF at 15.0%/12.8% CAGR in 2022- 26F, respectively. Total supply of WH/RBF can reach 2.5/3.7m sqm in 2026F, respectively, with notable projects come from Mapletree Hung Yen P3, GNP Nam Dinh Vu, BW Nam Dinh Vu P2 …

For Southern market, VNDirect estimates 2026F total supply of WH/RBF will grow at 13.4%/16.7% CAGR in 2022-26F. “We see a contrast in the movement of new supply of WH and RBF. While WH movement now tend to move to Long An and Dong Nai, RBF movement tend to move to Binh Duong and BR-VT. We believe developers owning existing land bank like BCM will enjoy the most from this trend”, said this stock company.