Industrial real estate at the end of 2023: "The market is starting to show positive signals"

The industrial real estate segment is continuing to attract the attention of domestic and foreign investors. Vietnam is still an attractive investment destination, improved FDI and positive growth in the first 7 months of 2023 is considered one of the major driving forces for the industrial real estate market to maintain growth and development. .

Talking to Reatimes, Mr. Vo Hong Thang, Director of Consulting Services & Project Development - DKRA Group said that the industrial real estate market still records quite positive development trends with continuous increases in prices. increase in rental prices and occupancy rates. However, in the last months of 2023, the market still faces many challenges, most notably the shortage of new industrial park supply, due to many obstacles in the compensation process and legal procedures.?

Identify opportunities and challenges

Reporter : In the context of an uncertain economy and difficulties for businesses, will the industrial real estate market be affected , sir ?

Mr. Vo Hong Thang : The current economic situation is facing many difficulties, interest rates and inflation are high, real estate businesses are facing a serious lack of capital, and market liquidity has almost stagnated. However, the industrial real estate type still records quite positive development trends with continuous increases in rental prices and occupancy rates.

Typically, in the industrial market of the Southern key economic region, the demand for industrial land space is still growing with the asking rent price of 165 USD/m 2 /term, an increase of 10% over the same period. The occupancy rate maintains its performance with a relatively high rate of about 83%.

Among them, we can mention a number of large FDI projects such as: Far Eastern invested an additional 250 million USD to expand production lines in Binh Duong, Suntory Pepsico project invested 185 million USD in Huu Thanh Industrial Park in Long An. ,…

It can be said that the policy of China +1, Korea and Japan looking East is putting Vietnam in a priority position in the eyes of tenants.

Besides, the trend of shifting the global supply chain to Vietnam, including some businesses such as Intel, Foxconn, Goertel,... will contribute to creating momentum for the growth of the real estate market. Vietnam industry.

Reporter : Can you analyze the favorable and unfavorable factors in attracting and developing the industrial real estate sector in the coming time?

Mr. Vo Hong Thang : In the first 7 months of 2023, FDI improved and grew positively, this is considered a great driving force for the industrial real estate market to maintain growth and development.

Many industrial park investment projects have had their investment policies approved and begun implementing the next phases. In addition, a series of big companies from Korea, China, America, Singapore with large FDI capital flows have invested in Vietnam and are planning to expand in the near future such as: Samsung increased capital to 20 billion USD, LG Investing an additional 5 billion USD, SK stepped up capital injection into Vietnam through investments in Masan, Vingroup,... making Vietnam a bright spot for supply chain and logistics shifts in the Asia-Thai region. Binh Duong.

However, the market still has many challenges, most notably the shortage of new industrial park supply, due to many obstacles in the compensation process and legal procedures.

Moreover, currently, Vietnam is competing in attracting FDI with other countries such as Indonesia or Malaysia.

Reporter : The global minimum tax will affect the decisions of how foreign investors in Vietnam will compete , sir?

Mr. Vo Hong Thang : The issue of global minimum tax is creating many challenges in attracting FDI to Vietnam. Because investors tend to shift investments to other countries, there will be a benefit sharing mechanism related to this global minimum tax regulation.

The application of the global minimum tax will make Vietnam's current investment incentives, tax exemptions and reductions less attractive to foreign direct investment enterprises, and even bring benefits. negative impact on the market in Vietnam. Specifically, when the global minimum tax policy is applied, companies enjoying tax incentives under the investment attraction policy in Vietnam will have to pay an additional 15% global minimum tax rate in the country. has a "parent" company as its headquarters. This increases the financial burden of businesses and directly reduces Vietnam's competitiveness in attracting FDI.

Furthermore, if Vietnam does not apply the global minimum tax, it must accept that other countries that apply this policy have the right to collect additional taxes on businesses in Vietnam if they are subject to the minimum tax. Globally 15%.

However, the application of global minimum tax regulations also brings new opportunities to Vietnam such as: Contributing to increasing state budget revenue, reforming the tax system according to international practices and standards. . In addition, the imposition of the global minimum tax also contributes to minimizing tax evasion, tax avoidance, transfer pricing, and profit shifting. However, the State also needs to add additional forms of investment incentives and support to ensure competitiveness and increase the attractiveness of the investment environment in Vietnam in the coming period.

Reporter: In the last months of 2023, how will the industrial real estate market change, sir?

Mr. Vo Hong Thang : Currently, although the market is starting to show positive signs, in the short term there are still many challenges when the legal procedures are lengthy, leading to no new supply being recorded. in the last months of 2023.

In addition, the industrial park land fund available for handover is quite limited, while demand is still high, so land rental prices can continue to maintain high growth in the year-end period.?

Particularly for warehouses and ready-built factories, a decline may continue in the context of still quiet commercial activities, especially warehouses with tenants who are manufacturing enterprises serving the market. export market. Faced with fluctuations in the global economy, investors and tenants tend to wait and monitor market developments, and at the same time become more cautious in expanding business scale and deploying new project.

"Green" trend - the choice of short-term investors

Reporter: In your opinion, at what stage will the industrial? real estate market recover and develop?

Mr. Vo Hong Thang : As mentioned above, the industrial real estate market in July began to record positive signals thanks to positive growth in FDI capital flows. However, the market recovery depends heavily on the recovery of the general economy. When the economy grows, businesses will need to expand production and logistics activities, thereby creating increased demand for production and warehouse space.

In addition, before the global minimum tax regulations, additional business support policies from the Government such as tax reduction and provision of credit packages are necessary to stimulate market demand and attract investment. next time.

Reporter : So what difficulties need to be resolved for businesses to develop industrial real estate , sir?

Mr. Vo Hong Thang : It can be said that the trend of shifting supply chains in the world is currently opening up opportunities for the industrial real estate market in Vietnam. However, the development of industrial parks still faces many difficulties such as lack of land fund, lack of capital, lengthy administrative procedures, continuous delays in site clearance, etc. And to remove difficulties for Enterprises deploying industrial real estate development, I have the following recommendations:

Firstly, simplify and reduce administrative procedure barriers related to the establishment and development of industrial parks. Ensure transparency and fairness in investment licensing.

Second, there needs to be policies to support capital, tax exemptions, and tax reductions for investing businesses. Policies need to provide timely support, helping businesses access more quickly and easily.

Third, the Government supports investment in transport infrastructure, electricity, water, and public services to reduce costs for businesses developing industrial real estate.

Fourth, promote market access through promotion programs to create connections between investing businesses and domestic and foreign partners.

Reporter: Given the world economic context, does the decline in aggregate demand have any disadvantages for Vietnam and in what direction should industrial real estate development go , sir?

Mr. Vo Hong Thang : When the world's aggregate demand declines, it will partly reduce the value of Vietnam's import and export, leading to a slowdown in investment activities and industrial production expansion. Foreign investors are also more cautious with investment plans, due to fear.

However, the short-term decline did not significantly affect the performance of construction investment and leasing of industrial parks in the first 7 months of the past year, thanks to both rental prices and occupancy rates remaining at high levels.

Moreover, in the first 7 months of 2023, FDI capital flows also recorded a recovery with positive growth reaching nearly 16.24 billion USD, up 4.5% over the same period and up 8.8 percentage points compared to the first 6 months of the year.

We see that today, green development and reduction of CO2 emissions are gradually becoming an inevitable development trend and a competitive advantage for industrial park investors. Therefore, the market is witnessing the emergence of new industrial parks, invested in modernity and automation, with special emphasis on "green" criteria with measures to reduce CO2 emissions. This is an important factor contributing to increasing the competitiveness and attractiveness of Vietnam's industrial parks in the race to attract FDI.