INDUSTRIAL REAL ESTATE 2023: MULTIPLE CHALLENGES APPEARING

The positive factors supporting the industrial real estate industry are fading, coming from the challenges that gradually appear. This segment will see new supply scarcity in 2023 as the approval process is delayed due to regulatory bottlenecks. In addition, Vietnams competitiveness in attracting FDI is gradually weakening compared to other countries in the region.

The industrial real estate industry report of VNDirect Securities Joint Stock Company recently said that in 2022, the total land area of ​​industrial zones in the southern market increased by 9.2% over the same period to 41,950ha. in which 66.6% is the rental area, about 27,950ha (up 8.2% over the same period).

Meanwhile, the Northern market witnessed a sharp increase in new supply in the fourth quarter of 22, about 590ha of leasable area (mostly coming from suburban areas), helping to increase the leasable area by 7.9% compared to the previous quarter. with the same period to 11,923ha. The total area in 2022 increased by 8.1% over the same period to 16,915ha, while the occupancy rate decreased by 1 percentage point compared to the previous quarter and 0.2 percentage point over the same period to 79%.

Even so, VNDirects research team found that the South and the North both benefited from the upward trend in rents, with increases of 10.5% and 7.5% respectively over the same period.

New supply decreased due to the delayed approval process

Assessing the prospects for the period of 2023-2024, VNDirect finds that the positive factors supporting the industrial park real estate industry are fading and challenges are gradually appearing.

Firstly, VNDirects research team believes that the industrial park real estate market will witness a scarcity of new supplies in 2023 when the approval process is delayed due to legal problems.

Specifically, since the first quarter of 2022, there have not been any new proposals to establish industrial parks in both the South and the North. In addition, there are very few new industrial parks included in the national industrial park development master plan.

According to VNDirect, this comes from the fact that the industrial park development planning is still spread out, mainly decided by the locality. Moreover, the change of senior leadership in many localities in the past year has slowed down the approval process of many projects. This causes slower-than-expected site clearance and overlap in planning or infrastructure outside the industrial park.

"The industrial park real estate market will face a shortage of new supply from now until the end of 2023," VNDirects report emphasized.

For the southern market, after the supply boom in the first half of 2022, no new supply was put into operation in the second half of 2022.

The southern market will experience a difficult period to deploy new projects in 2023. After that, the new supply for the period 2024-2027 is also quite limited (about 1,134ha, 76% higher than reported). before).

As for the North market, VNDirect found that the northern provinces started developing industrial zones later than the South, so the existing land bank in some provinces is still quite abundant with reasonable rental rates.

Although many projects are waiting for approval, the shortage of new supply in the Northern market will last at least until the end of 2023. After that, about 3,757ha of industrial park land is expected to be put into use. operating in the period 2024-2026, with the largest supply coming from Hai Phong, Vinh Phuc, and Bac Ninh.

Increasing competitive pressure to attract FDI

The second challenge that the VNDirect research team finds is that Vietnams competitiveness in attracting FDI is gradually weakening compared to other countries in the region.

A recent report by the Ministry of Planning and Investment said that FDI realized in February 2023 increased by 12.1% over the same period to $1.2 billion. In the first two months of 2023, realized FDI decreased by 4.9% year-on-year to $2.6 billion. Registered FDI decreased by 51.4% year-on-year in February, bringing the total registered FDI capital since the beginning of the year to only $3.1 billion (down 38% over the same period).

FDI inflows into Vietnam weakened in the first 2 months of 2023 as new investment plans and production expansion were affected amid many uncertainties in the global economy, including slowing global growth. , high inflation weighed on consumer spending and financial market liquidity tightened as the Fed raised interest rates.

Moreover, Indonesias promulgation of the Omnibus Law in 2020 has brought many investment and operation opportunities for foreign companies to the country. Since then, FDI inflows into Indonesia have grown positively by 10% year-on-year in 2021 and 44% year-on-year in 2022, increasing to $45.6 billion.

Vietnam and Indonesia are the two countries receiving the most FDI. If Vietnam is transforming itself into an electronics manufacturing center, Indonesia is aiming to develop the electric vehicle supply chain.

“We see the growth of the electric vehicle and semiconductor industries as shaping the investment landscape in ASEAN. The major changes in these two industries include attracting new types of investors, adding new segments in the value chain, expanding capacity, and participating more in regional production networks.” VNDirects report evaluates.

In addition, because the potential for attracting FDI in these two industries will continue to increase in the coming years, countries in the region have actively promoted FDI attraction for electric vehicle production, including manufacturing. batteries, while encouraging consumers to use electric vehicles. However, Vietnam is lagging behind other countries in this trend, making it less attractive for Vietnam to attract FDI inflows.

Source: Vietnamfinance.vn