The flow of investment capital is shifting to Tier 2 markets and the development of green industrial parks is ...
The flow of investment capital is shifting to Tier 2 markets and the development of green industrial parks is a prominent trend that will reshape the industrial real estate market in the near future.
Tier 2 markets attract FDI capital
Despite facing many challenges in 2023, Vietnam's economy, according to Ms. Duong Thuy Dung, CEO of CBRE Vietnam, achieved positive results in industrial real estate.
Specifically, the occupancy rate of industrial parks in Tier 1 markets (major markets such as Hanoi, Ho Chi Minh City, Dong Nai, Binh Duong, Long An) is promising. Manufacturers from many countries continue to expand their operations strongly in both the North and the South, with average occupancy rates in the industrial parks in these two regions reaching 81% and 92%, respectively.
The absorption of industrial land in the Northern market reached the highest level in 5 years, exceeding 800 hectares, a 37% increase compared to 2022. Due to relatively limited industrial land reserves, the Southern market saw a lower absorption area, about 32% less than in 2022, reaching approximately 500 hectares. In addition to electronics, automobiles, and accessories manufacturers, tenants from new industries in the high-tech sector such as electric vehicle manufacturing, semiconductors, and green materials are also very interested in the Vietnamese market.
Of note, although Tier 1 markets still hold the advantage, in a recent evaluation report, MB Securities Company (MBS) observed that investment capital is shifting to Tier 2 markets (provinces adjacent to major markets).
Developing more green and smart industrial parks will contribute to Vietnam's sustainable growth and ensure the attraction of stable FDI capital.
In the North, foreign direct investment (FDI) is tending to flow into Tier 2 markets such as Quang Ninh, Bac Giang, and Thai Nguyen. Recently, these provinces have achieved very positive results in attracting FDI. For example, in Quang Ninh, the notable project is the Jinko Solar Electro-optical Technology Complex with an investment of USD 1.5 billion; in Bac Giang, the prominent project is the Hana Micron Vina 2 Semiconductor Manufacturing Plant; and in Thai Nguyen, Samsung Group continues to increase its investment by an additional USD 1.2 billion.
The proportion of FDI inflows into Tier 2 markets in the North increased from 20% in 2018 to 53% in 2023. The reason is that industrial land rental prices in Tier 2 markets are 20% lower than in Tier 1 markets, and the industrial land occupancy rate in Tier 2 markets averages 64%.
In the South, the proportion of FDI inflows into Tier 2 markets also increased from 21.6% in 2022 to 23.2% in 2023. In particular, Ba Ria - Vung Tau province attracted over USD 1 billion in FDI, with the notable project being the Hyosung Vietnam Carbon Fiber and Material Production Project with an investment of USD 540 million; Binh Phuoc province attracted over 40 FDI projects with a total investment of USD 758 million.
Tier 2 markets in the South attract many FDI projects due to the advantage of having large industrial land areas available for rent, with an occupancy rate of only 63%, while Tier 1 markets have reached 90% (Ho Chi Minh City and Binh Duong reached 95%; Dong Nai and Long An reached over 80%). Additionally, land rental prices in Tier 2 markets are only half of those in Tier 1 markets.
Towards green industrial parks
In addition to the shift of investment capital to Tier 2 markets, the development of green industrial parks to attract new capital is expected to shape the industrial real estate market in the future.
Mr. Andy Han Suk Jung, CEO of Filmore Real Estate Development Joint Stock Company, expects that FDI inflows into Vietnam will continue to remain high. According to Mr. Andy Han Suk Jung, Vietnam is facing a new wave of investment following the upgrading of Vietnam - US relations last year. Therefore, the strategy of developing more green and smart industrial parks will contribute to Vietnam's sustainable growth and ensure the attraction of stable FDI capital.
According to MBS experts, traditional industrial parks are losing their competitive advantage. Instead, the trend of developing green industrial parks is attracting many investors focused on sustainability factors. This is also a common trend worldwide.
"Not outside the general trend, Southeast Asian countries are focusing on attracting investment in green industries. In 2021 and 2022, the number of green projects increased by 12% and 21%, respectively. Indonesia attracted investment in electric vehicle production chains, Singapore focused on semiconductor and 4.0 technology industries, Thailand developed the electronics industry, while Vietnam is still in the early stages of attracting green investment," MBS assessed.
In fact, although not yet explosive in terms of quantity, the trend of forming green industrial parks is becoming increasingly clear. Some investors are actively developing green industrial parks to attract investment capital. Recently, the VSIP Industrial Park, Eco Logistics Centre Project in Binh Duong by Frasers Property Vietnam received LEED certification from the US Green Building Council.
Some other industrial park projects that have been LEED certified include the Core5 Hai Phong Project at Deep C2 Industrial Park (Hai Phong), the Logos Project at VSIP Bac Ninh, the RBW Project at Phu Tan Industrial Park (Binh Duong), and the Xuyen A Industrial Park (Long An).
Mr. Paul Tonkers, Deputy Director of Industrial Real Estate at Core5 Vietnam, believes that investors are focusing on high-value industries such as electronics and semiconductors, so industrial park developers need to restructure their services and products to serve tenants' needs well. They need to adjust and meet the requirements of ESG standards (environmental, social, and governance), integrate them into long-term, sustainable development strategies such as carbon neutrality, energy, and water conservation...
Via Tin nhanh chung khoan