The industrial property segment is predicted to continue to be a bright spot in Vietnam’s real estate market in the coming years after reaching impressive growth in 2022, local insiders said.
Benefiting from the existing land bank
| Many IP developers earn profit from developing IP projects. Photo: Cong Hung |
A recent report on the industrial real estate industry of VNDIRECT Securities predicted that by 2023, the net profit of listed IP developers is expected to grow by around 12% year-on-year.
"We see more challenges for IP developers in the next two years due to the slow project approval process and limited funding sources. However, this is likely to turn into opportunities for developers that own ready-to-lease land banks, such as Becamex IDC Corporation (BCM)," the report noted.
"We believe that developers with a portfolio of land will benefit the most from this trend. In this sense, we like Phuoc Hoa Rubber Company (PHR) and BCM for long-term investments," the report said.The firm forecast that although the approval time is prolonged, Phuoc Hoa Rubber Company can maintain stability, with the goal of developing five new industrial zones with a total area of more than 2,700ha in the 2026 – 2030 period.
Meanwhile, PHR will book a one-off gain in the first quarter of 2023, with about VND207 billion (US$8.8 million), making a huge contribution to its net profit.
BCM is one of the major IP developers, with six operating IPs spanning more than 4,000ha, and the largest listed IP developer in terms of the leasable land bank (about 944ha).
According to SSI Securities Corporation, demand for industrial park land rental in Vietnam will grow strongly in 2023, thanks to policies promoting a return to investing in the Southeast Asian country.
Due to short supply this year, forecasts from securities firms show that rental prices are expected to continue to rise. According to the SSI Securities Corporation's report, rents would rise by an average of 8-20% year-on-year, depending on the region. Last year, industrial real estate rents rose by an average of 10% due to high demand.
Impressive business results
| The industrial property market will witness a scarcity of new supplies. Photo: VGP |
Recent reports from securities companies showed that, in 2022, the industrial real estate sector continued to receive the attention of many investors, as rental prices are rising along with high occupancy rates, making the return on investment in industrial parks (IPs) the top performer in the real estate sector.
According to the VNDIRECT Securities' report on the industrial real estate industry, last year, the pre-tax profit of Viglacera, one of the big players in the market, from IP leasing and worker housing was estimated at VND1.6 trillion ($68.2 million), exceeding 33% of the annual plan and increasing 57% compared to 2021. In 2022, industrial real estate accounted for more than 70% of its total consolidated pre-tax profit.
Viglacera's main business line is construction materials, but in recent years, real estate has been the main contributor to the company’s profit growth, the securities firm said.
The construction materials company planned to develop 10 new IPs in the 2022-2023 period. By 2025, it will increase the total number of IPs to 20, of which new IPs would have a total area of about 2,000-3,000ha.
Similarly, Kinh Bac City Development Holding Corporation (KBC) also revealed impressive business results in 2022. Recently, this company reported that it received cash dividends from its subsidiary - Saigon - Haiphong Industrial Park Joint Stock Company (SHP), with a payout ratio of up to 330%. SHP specializes in building and leasing IPs with modern and comprehensive infrastructure, leasing, and buying factories and offices, business industrial park services, and housing development.
The amount of dividends that KBC received is estimated at nearly VND12 trillion, helping the corporation to have the new cash flow to build more industrial zones in the future.
According to the Ministry of Planning and Investment, there were 563 IPs across the country, of which 397 industrial zones (including 352 IPs outside economic zones, another 37 in coastal economic zones, and eight in border economic zones) with a total land area of 122,900ha. As many as 292 IPs are operational with a total land area of 87,100ha.
