The demand for industrial park land is forecast to continue to be positive thanks to Vietnam having (1) signed many documents on economic and trade cooperation and (2) Upgrading relations with the world's leading economies. Specifically, 17 bilateral cooperation documents were signed during the visit of the President of South Korea or in early September 2023, Vietnam and the US upgraded their relations to a comprehensive strategic partnership…

The room to establish a new industrial park until 2025 is still quite large. According to the Government's national land use plan in Decision 326/QD-TTg, the room for developing new industrial parks until 2025 in the North and South is about over 5,000 hectares. In particular, the provinces that are focused on expanding include Hai Phong, Bac Giang, Thai Nguyen in the North and Dong Nai, Long An and Binh Duong in southern Vietnam.

Accelerated transport infrastructure projects will solve the "logistics" bottleneck to support the industrial real estate sector. Logistics costs in Vietnam account for about 16.8% of the value of goods, while this cost in the world is only about 10.6%. Currently, the government is making efforts to improve transport infrastructure with a series of public investment projects to help connect inter-provincial transport and shift production to non-central provinces such as North-South Expressway, 4th Ring Road - Hanoi, 3rd Ring Road - Ho Chi Minh City. Ho Chi Minh City, and seaport and airport projects are being planned and implemented.

In addition to the positive outlook, some of the challenges that the industrial real estate sector will need to handle in the near future include:

First, limit ed new supply makes industrial park rents continue to increase. BSC believes that the shortage of industrial park supply comes from: (1) The process of implementing new IPs is delayed due to overlapping legal procedures, (2) GPMB still has many obstacles, (3) The mechanism of conversion to industrial park land of each type of land is different, causing difficulties in implementation. Therefore, the average industrial park rental price in 2024 is estimated to continue to increase by 7-8% yoy. However, BSC assesses that this is an opportunity for enterprises owning large land banks ready for lease, such as IDC or KBC.

Second, the application of the global minimum tax policy may affect the attraction of foreign investment in Vietnam. From 2024, countries in the Organization for Economic Co-operation and Development (OECD), including Vietnam, will impose a minimum tax rate of 15% on companies with a revenue of EUR 750 million or more. Meanwhile, foreign enterprises are currently enjoying tax incentives at rates of 5%-10%, in case they meet the conditions in priority areas or large investment scales. Therefore, BSC assesses that this tax policy will be able to affect the attraction of FDI, but the impact will not be much because (1) Tax incentives are not the leading factor in choosing investment locations of FDI enterprises, and (2) The Government is researching other incentives to deduct from the tax obligations of enterprises, such as "Support the cost of training human resources"; "Develop a plan for the implementation of monetary grants".

Third, the level of competition to attract FDI is increasing among countries in the region. In the context that ASEAN is emerging as an attractive destination for manufacturers of electronic components and semiconductors, Vietnam also needs to improve its attractiveness to compete with other competitors in the region. According to JLL, Vietnam is underperforming Thailand, Indonesia or Malaysia in indicators of infrastructure, labor productivity and business environment. However, FDI inflows into Vietnam still rank first in the ASEAN region.

BSC continues to maintain its positive recommendation for industrial park real estate sectors in 2024 thanks to (1) IPs in Vietnam will still be an attractive destination for foreign businesses, (2) Limited supply and high demand are still factors that help industrial park rental prices remain high, (3) Improved transport infrastructure makes industrial zones far from the central economic region more accessible to FDI inflows. BSC makes buy recommendation for industrial park enterprises with a large commercial land fund ready for lease, rental prices forecast to remain high, and a healthy financial foundation, including: KBC, IDC, SZC…