- News in Vietnam
- 28 February 2022
Industrial park real estate maintains the heat in 2022
High demand and newly expanded supply are the reasons why real estate will continue to be hot this year.
Updating the industrial park real estate industry, VNDirect Securities Company forecasts that land rent will continue to increase by 6-10% over the same period in 2021 in both the South and the North, in the context of high demand yet limited supply. This year, this sector will maintain its attractiveness thanks to the increase in supply to meet the market’s high demand.
In addition, VNDirect also said that the industrial park real estate market is supported by four major trends of 2022.
The first is promoting public investment in infrastructure. VNDirect believes that the disbursement of public investment capital in 2022 will increase by 20-30% compared to the actual distribution in 2021 with a series of large infrastructure projects being the driving force for the industrial park real estate group.
The National Assembly has approved an economic stimulus package worth VND 347,000 billion. The capital to implement the group of infrastructure development solutions is up to 113,850 billion, focusing on the development of 13 important traffic projects (expected to be 103,164 billion).
Similarly, in the medium-term public investment plan for the 2021-2025 period, the capital allocation for transport infrastructure development continues to be focused, with VND 570,412 billion, accounting for 52% of the total investment capital from the budget. The government is also setting a target that the whole country will own 3,000 km of highways by the end of 2025. Therefore, the upcoming public investment packages will focus on disbursing a series of expressway, especially the North-South one.
The second is the production expansion trend promoted by FDI and domestic enterprises. VNDirect forecasts that FDI capital into Vietnam will recover strongly in 2022 thanks to the plan to resume international commercial flights from the beginning of the year. This will create favorable conditions for investors and professionals to return to Vietnam and promote investment in the coming year.
On the other hand, Vietnam remains an attractive location for foreign companies in the “China+1” strategy withadvantages such as competitive labor costs and a large population. Vietnam also benefits from signing free trade agreements (FTAs) such as CPTPP, EVFTA, RCEP …
In addition, foreign and domestic enterprises are actively expanding production thanks to the solid production foundation of Vietnam, such as LG Electronics, Intel, Mitsubishi Motors, O.N Vina.
Thirdly, the boom in e-commerce increased inventory requirements, and diversification of supply chains has helped boost demand for industrial park land warehousing services.
According to the Ministry of Industry and Trade, Vietnam’s e-commerce revenue is experiencing an estimated compound growth rate of 44.9% to $52 billion during 2020-2025. According to CBRE Asia, revenue from e-commerce reaching 25-27 billion USD will require about 350,000 m2 of new warehouse space, equivalent to more than 700,000 m2 of warehouse space in 2025 for Vietnam. In addition, strong commodity demand and supply chain disruptions also increase the need for warehouse space to stock goods and minimize future disruptions.
Transportation costs increase much more than warehousing costs, accounting for 45-70% of total supply chain costs while fixed-asset expenses account for only 3-6%. Therefore, the report has estimated that warehouses near significant traffic hubs such as airports and ports with good traffic connections will be vigorously sought after.
The last trend is promoting new supply expansion in the Red River Delta and North Central – Central Coast.
Industrial park land supply is expected to increase by 44,760 hectares in 2022-2025 to meet Vietnam’s increasingly strong land rental demand and new supply will be boosted to expand in these areas. Besides, VNDirect estimates thatready-built warehouses and factories will continue to be attractive in 2022 with a series of domestic and foreign investors looking for opportunities to enter the market.
They forecasts the compound profit growth of new supply of warehouses and ready-built factories of 22% and 14% respectively in the south, and 46% and 10% in the north in 2021-2023.
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