Capital flows strongly into industrial real estate
Industrial real estate continues to be a bright spot in the first half of 2024. This is also a segment that strongly attracts capital flows in the context of a difficult general market.
Preferential bank
Compared to other segments, industrial real estate is considered to have easy access to bank credit capital , especially since July 1, the credit risk coefficient of industrial real estate has decreased from 200% to 160%, according to Circular No. 22/2023/TT-NHNN of the State Bank. This will encourage commercial banks to actively lend to industrial real estate business projects .
Mr. Nguyen Van Nguyen, Deputy Head of Internal Control Department of the State Bank of Vietnam, Ho Chi Minh City Branch, assessed that in the context of low capital absorption in the economy , the growth of this market will have a positive impact and effect on other industries and fields, including banking credit activities.
“Real estate credit for infrastructure development in export processing zones, industrial parks and office for lease continues to maintain a growth trend and has the highest growth compared to other sectors,” said Mr. Nguyen.
Of which, credit for export processing zones and industrial parks increased by 9.47%; credit for offices and high-rise buildings increased by 11.2% compared to the end of 2023. “Although the proportion of outstanding loans for this sector is low compared to the total outstanding real estate credit, the increase in credit reflects the development trend of industrial real estate and is a positive factor that directly affects production, business activities and economic growth,” Mr. Nguyen assessed.
It is understandable that banks are actively lending to industrial real estate, especially in the context that industrial real estate developers have maintained positive business results in the context of general difficulties. A survey by reporters of Dau Tu Newspaper showed that most industrial real estate enterprises recorded revenue and profit growth in the first quarter of the year, with only one unit reporting a loss due to not being able to hand over land and record revenue.
Some enterprises with large profits include IDICO Corporation (VND 797 billion), Sonadezi Industrial Park Development Corporation (VND 362 billion), Viglacera Corporation (VND 237 billion), Becamex IDC (VND 119 billion)… Most of the profits come from the main business, which is leasing industrial infrastructure. These are also enterprises that are forecasted to have many growth prospects this year.
In the first half of 2024 market report, Dat Xanh Services assessed that Vietnam’s industrial real estate market recorded stability in supply, while rental demand grew steadily and rental prices tended to increase slightly.
Total supply in the North and South remained stable compared to the previous quarter, reaching 14,500 hectares and 27,700 hectares, respectively. Although there were not many fluctuations compared to the end of 2023, the market still witnessed the development of new projects in some localities, demonstrating increasing interest and investment in this field.
Demand for industrial real estate rentals has increased steadily thanks to the trend of shifting production structure to the industrial sector. The recovery of production activities in the second quarter of 2024 has also contributed to improving occupancy rates in industrial parks.
Market continues to grow
Not only do banks prioritize investing in this segment, but since the beginning of the year, many investors strong in urban and housing construction have also taken advantage of the opportunity to pivot to industrial real estate – a rare bright spot in the market.
Typically, Taseco Land (TAL) aims to develop 5 new industrial parks, with a scale of more than 1,000 hectares in the next 5 years. Khang Dien also contributes to heating up the race with the Le Minh Xuan Industrial Park Project (HCMC). The company representative said that they are completing compensation and site clearance so that this industrial park is qualified to be put into operation from next year.
Mr. Pham Anh Khoi, Director of the Institute for Economic – Financial – Real Estate Research, Dat Xanh Services, assessed that the supply of industrial real estate in the last 6 months of 2024 will increase slightly in the short term and increase significantly in the long term when many new industrial land areas are planned. In addition, FDI capital in the processing and manufacturing industry is continuously increasing, promoting the increase in demand for industrial land and industrial parks.
“Due to positive trends in both supply and demand, industrial land rental prices are expected to stabilize or increase slightly in the second half of 2024, and occupancy rates are forecast to increase slightly in both the South and the North. This is partly due to the Government’s flexible foreign policy to attract investment and the economic restructuring process, so industrial real estate will continue to be a bright spot in the market in the medium and long term,” Mr. Khoi believes.
Sharing the same view, Mr. Truong Khac Nguyen Minh, Deputy General Director of Vietnam Industrial Park, assessed that capital flows continue to develop positively in the context that Vietnam is still an attractive investment destination. In addition to objective factors such as the trend of production shift, it is also necessary to acknowledge the positive effects of the Government’s policies to attract investment and create confidence for foreign investors.
However, to attract large capital flows, Mr. Minh said, it is necessary to always monitor the market and daily developments, grasp the needs to adjust and improve the quality of services for investors.
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