Shiny outlook for Vietnam business actual property amid FDI upward push

Industrial park developers in Vietnam expect higher profit growth this year as disbursed foreign direct investment (FDI) in the first five month is estimated at $8.25 billion, up 7.8% year-on-year – the highest figure in five years.

According to their Q1/2024 financial statements, many industrial real estate developers recorded positive business results.

Top developer Becamex IDC, listed on the Ho Chi Minh Stock Exchange (HoSE) as BCM, reported Q1 revenue of VND812 billion ($31.9 million), up 2.6% compared to the low level in the same period last year.

Its after-tax profit hit VND118 billion ($4.64 million), up 29%, mainly thanks to the revenue contribution of Bau Bang Industrial Park in Binh Duong province with higher gross profit margin.

Viglacera (HoSE: VGC) posted a revenue decrease of 4% to VND2,664 billion ($104.7 million), but its after-tax profit surged by 57% to VND237 billion ($9.3 million). The industrial park segment with rising rental prices was its driving force.

Idico (HoSE: IDC) reaped VND2,467 billion ($96.94 million) in revenue, double the figure in the same period last year, and VND695 billion ($27.3 million) in net profit, 4.7 times higher. Its revenue hike was derived from the handover of industrial park land in projects with previously signed contracts and 1.45 hectares rented to Japan’s AEON Co., Ltd.

Many other businesses reported positive business growth compared to their low figures in the same period last year, such as Saigon VRG Investment Corporation (SIP), Sonadezi (SZN), Sonadezi Chau Duc (SZC), and Tan Tao Investment and Industry Corporation (ITA).

Meanwhile, Kinhbac City Development Holding Corporation (KBC) had disappointing business results. Revenue plunged by 93% to VND152 billion ($5.97 million) with a net loss of VND86 billion ($3.38 million)) as compared to a profit of VND941 billion in the same quarter last year.

The company explained that during the period, revenue from industrial park business activities decreased and financial income from investment transfer was not recorded as in the same period last year.

With such positive business results in Q1, industrial real estate businesses all set higher profit targets than 2023. For example, Viglacera plans to a profit increase of 28% to VND1,216 billion ($47.78 million) this year, Idico aims for a 40% rise in profit to VND2,502 billion ($98.31 million) while SIP, SNZ and SZC 20%.

Bright prospects for northern industrial park market

According to the General Statistics Office, total FDI registered in Vietnam (including new registrations, additions, and capital contributions/share purchases) in the year to May 20 had reached $11.07 billion, up 2% year-on-year.

The five-month disbursed FDI is estimated at $8.25 billion, up 7.8% year-on-year – the highest figure in five years.

Broker VPBank Securities (VPBankS) believed that in recent years, Vietnam has continuously improved its value chain and is about to benefit from the “China + 1” strategy thanks to the U.S.-China trade war, investors’ diversification and shifting of production value chains outside of China, towards countries in Southeast Asia.

It cited property services firm CBRE’s data which shows in 2023, investors from mainland China, Taiwan and Hong Kong accounted for 47% of those in demand for industrial park land lease, up 32% compared to 2022. This signals a strong shift from China in the near future.

More and more technology/electronic manufacturing corporations have specific plans to shift their production value chains from China to Vietnam, such as Apple, Dell and Google, VPBankS said, adding the northern industrial park market will be a potential destinations amid this trend.

The northern and southern industrial park markets are showing two opposing trends in supply. The southern market is still in a scarcity of new supply as there are no new primary projects put into operation and the occupancy rate already reaches 89%.

In contrast, the northern market posted abundant new supply in the first quarter. In Q2, three projects namely Tien Thanh and Nam Dinh Vu – phase 2.2 in Hai Phong city and the Hung Yen Industrial Park No. 3 in Hung Yen province will provide an additional 597 hectares of rental area.

Except for Hanoi, which has run out of rental space, rental prices in the northern market are estimated to increase by 7% over the same period last year. Hai Duong, with a low base, has ample room for price hikes, with an impressive increase of 14% in Q1.

VPBank Securities estimated that the northern industrial park market will record new supply of 3,039 hectares and 2,268 hectares in level-1 and -2 areas, respectively.

Emerging level-2 areas such as Quang Ninh, Vinh Phuc and Bac Giang are attracting FDI capital. They are capable of providing high quality supply with competitive rental prices, approaching those in level-1 areas.

Investors should pay heed to businesses that own large existing or future land funds in the northern region and have experience in developing industrial parks meeting the needs of electronics production such as KBC and IDC, the broker advised.