Industrial property developers that own land banks in Ba Ria- Vung Tau and Hai Phong, such as SZC, IDC, and KBC, will enjoy the greatest advantages.

Infrastructure development

The National Assembly recently approved a new economic stimulus package worth c.VND 347,000bn in the program for socio-economic recovery and development. Notably, infrastructure investment amounted to VND113,850bn with a focus on 13 important transport projects (expected to spend VND103,164bn). In addition, the medium-term public investment plan for the 2021–25 period is mainly for transport infrastructure investment, with a capital of VND570,412bn, accounting for 52% of the total central budget investment capital.

According to the Ministry of Transport, the government aims to have 3,000 km of highways by 2025F (from the current total of 1,163 km). Therefore, the upcoming public investment packages will focus on disbursing a series of highways such as the North-South expressway.

VNDirect believes that public investment disbursement in 2022 will increase by 20-30% yoy as (1) additional capital for infrastructure development from the new economic stimulus package; (2) the bottleneck of a lack of construction stone and backfill has been resolved after the government granted mining licenses for new mines; (3) construction material prices such as iron, steel, cement, and construction stone are expected to decrease in 2022; (4) the disbursement of public investment in 2021 is slow, reaching only 85% of the whole year plan; and (5) many key transport infrastructure projects completed the preparation as well as site clearance should begin construction in 2022. The government said it would speed up major infrastructure projects in 2022, such as Long Thanh Airport and the North-South Expressway.

Manufacturing expansion

Vietnam's foreign direct investment (FDI) inflows will recover strongly in 2022 thanks to three factors: (1) Vietnam's plans to resume regular international commercial flights from the beginning of 2022, which will create favorable conditions for investors and professionals to return to Vietnam and promote investment in 2022, (2) Vietnam remains an attractive location for companies’ ‘China1’ diversification strategy due to advantages such as competitive labor costs and large demography, and (3) last but not least, Vietnam has signed very progressive free trade agreements (FTAs) with major partners and regions in the world, such as CPTPP, EVFTA, RCEP... Therefore, in VNDirect’s view, investors investing in Vietnam will enjoy great tax incentives when exporting products to countries that have FTAs with Vietnam.

In addition, VNDirect observes that existing businesses from both FDI and local producers are significantly expanding their manufacturing capacity, driven by Vietnam’s strong industrial fundamentals such as LG Electronics, Intel, Mitsubishi Motors, and O.N Vina. According to Houselink, there are 193 expansion projects (3,816ha of land area) under construction in 8M21, with a total investment capital of c.US $6 billion. Besides, there are 435 expansion projects (12,104ha) under preparation and design phase in 8M21, which is higher than that of 387 new projects (6,597ha), pointing to the manufacturing expansion trend remaining strong in 2022F.

Rising demand for IP land for warehouses

According to the Ministry of Industry and Trade, Vietnam's e-commerce revenue is booming, with an estimated CARG of 44.9% to $52 billion in FY20–25F. According to CBRE Asia, the growth in e-commerce will drive the requirement for an additional 350,000sqm of new warehouse space with an approximate e-commerce revenue of US $25–27bn, translating into an additional more than 700,000sqm in FY25F for Vietnam.

Besides, robust demand for goods and the ongoing supply chain disruption heighten the need for additional warehouse space to stockpile goods and mitigate future disruptions as well, according to CBRE Econometric Advisors. Given that rising transportation costs are much higher than warehouse costs, accounting for 45–80% of total supply chain costs, while fixed facility costs (including real estate) account for only 3%–6%, logistics space near major transportation hubs, such as airports and ports with well-connected transport networks, will be keenly sought-after, in our view. VNDirect believes developers that own land banks in Ba Ria- Vung Tau and Hai Phong, such as SZC, IDC, and KBC, will enjoy the greatest advantages.

New supply

Vietnam's industrial land supply is expected to rise by more than 44,760ha in 2022–25F to capture the growing demand in the regions, mostly from the Red River Delta and North Central Coast. Besides, VNDirect believes that ready-built factories and warehouses will continue to do well in 2022, with both domestic and global developers looking to enter the market. CBRE is forecasting a CAGR WH/RBF new supply of 22%/14% in the South and a CAGR WH/RBF new supply of 46%/10% in the North in 2021-23F.