The Rising Demand for Vietnam’s Industrial Park Land Rentals in 2023
Introduction
As Vietnam’s economy steadily gains momentum, the demand for industrial park (IP) land rentals is set to see remarkable growth in 2023. This expectation is significantly attributed to government policies that are designed to encourage renewed investment in the Southeast Asian nation. The industrial property segment, buoyed by a solid performance in 2022, continues to be a bright spot in Vietnam’s real estate market, as various stakeholders anticipate sustained interest from investors.
Benefiting from the Existing Land Bank
The existing land bank in Vietnam presents a vital opportunity for industrial property developers. Recent insights from VNDIRECT Securities reveal a positive outlook for IP developers, forecasting a net profit growth of approximately 12% year-on-year in 2023. While challenges persist—such as slow project approvals and limited funding—developers who possess ready-to-lease land banks will likely capitalize on these conditions. Companies like Becamex IDC Corporation (BCM) and Phuoc Hoa Rubber Company (PHR) are identified as key players in this arena.
Many IP developers earn profit from developing IP projects. Photo: Cong Hung
Market Predictions and Trends
The optimism regarding industrial park land rentals is further echoed by SSI Securities Corporation, which anticipates strong demand fueled by favorable investment policies. The current marketplace reflects a short supply of available industrial land, leading to projections of rental price increases ranging from 8% to 20% year-on-year across various regions. Just last year, the rental prices already experienced a rise of approximately 10%, showcasing robust demand dynamics.
Impressive Business Performance
The industrial real estate sector has not only caught the eye of investors but has also demonstrated impressive business results. For instance, Viglacera, a significant player in the market, reported a pre-tax profit of VND1.6 trillion (roughly $68.2 million) from IP leasing and related activities in 2022. This figure exceeded 33% of the company’s annual plan and marked a 57% increase over 2021. Remarkably, more than 70% of Viglacera’s consolidated pre-tax profit stemmed from this segment, indicating the strategic importance of industrial real estate to its overall business model.
Furthermore, Viglacera, traditionally known for its construction materials, is intensifying its focus on real estate. Plans are underway to develop ten new industrial parks by 2023 and expand to a total of 20 parks by 2025, covering an area between 2,000 to 3,000 hectares.
Noteworthy Competitive Performers
Kinh Bac City Development Holding Corporation (KBC) also stands out for its remarkable results. The company reported substantial dividends from its subsidiary, Saigon-Haiphong Industrial Park Joint Stock Company (SHP), with a staggering payout ratio of 330%. Such financial achievements are paving the way for KBC to reinvest in building additional industrial zones and further strengthening its foothold.
The Structural Landscape of Industrial Parks
As of now, Vietnam is home to 563 industrial parks, comprising 397 active zones, including various economic zones. Combined, these parks cover a total land area of approximately 122,900 hectares. Out of these, around 292 parks are operational with a total area of 87,100 hectares. The expansion and development of these industrial zones underscore their integral role in attracting investment and fostering economic growth in Vietnam.
Conclusion
The outlook for industrial park land rentals in Vietnam for 2023 is exceptionally promising. With supportive government policies, an existing land bank primed for development, and impressive performances from leading companies, the industrial real estate market stands ready to capitalize on the opportunities ahead. Investors and stakeholders should keep a close eye on this evolving landscape as Vietnam continues to position itself as a key player in Southeast Asia’s economic development.