Vietnam's industrial real estate landscape sector has a rosy outlook, making it a "shining light" in terms of investment volumes, development of quality ready-built facilities, and underlying strong performance in land prices, said Alex Crane, managing director of Knight Frank Vietnam.
The volume of supply in the ready-built leasing segment has essentially tripled since 2016, Crane told at a Canadian Chamber of Commerce event held recently in Ho Chi Minh City.
“The ready-built factory and warehouse segment was virtually non-existent in 2016, at which time investors had to build their own facilities. The maturing of the development market now means ready-built inventory is set to increase 65% in the next three years, which is a tremendous amount and this is encouraging for growth of existing occupiers and new-to-market entrants. With this amount of space, we will see rents at stable, affordable levels which will be very encouraging for occupiers,” he said.
Reflecting on the previous year, Crane highlighted the significance of Decree No. 08/2023/ND-CP, which allowed bond issuers to extend their maturities. However, he cautioned that many issuances utilizing Decree 08 will now fall due this year alongside those issued in 2021 which may result in many developers feeling similar pressure from the capital market as the last two years.
Crane acknowledged the stabilization of interest rates but noted that access to borrowing for developers remains relatively high. As a result, Knight Frank predicts a natural slowdown in supply, which may soften price reductions in the residential sector through the remainder of the year.
The executive reported that the forecast number for newly launched apartments in 2024 had fallen by over 50% from the prior forecast in 2023 as a result of developers reviewing their timelines and pushing many of these projected developments into 2025 and 2026.
Crane observed a convergence of average apartment asking prices in HCMC and Hanoi. He attributed this to Hanoi's more rational market behaviour over the last few years, emphasizing less speculation and more genuine demand.
He also highlighted positive trends in Vietnam's commercial markets, particularly in high-quality offices and retail properties. He noted good general occupancy and demand, with multinational office occupiers showing optimism regarding headcount growth. However, he emphasized the need for upgrades to older offices and less-well-located shopping areas to keep up with evolving trends and standards provided by newer buildings.
While optimistic about Vietnam's overall property market in terms of net demand, Crane cautioned about the country's growing comparative expense to regional peers. He cited examples of large manufacturers opting for other countries based on cost considerations, stressing the need for Vietnam to incentivize the best manufacturers to invest in the country, particularly given the Global Minimum Tax is now applicable in Vietnam, removing some tax incentives for large manufacturers.
Regarding regulatory changes, Crane welcomed delays in discussions about a second property tax while the residential market finds a new market-led norm. He also expressed optimism about the implications of the new Land Law, viewing it as a positive step for Vietnam's market in the long-term.
Despite facing a host of difficulties, Vietnam and its real estate market still saw growing interest from foreign investors in the fourth quarter of 2023, according to property consultancy firm Savills’ Asia-Pacific Investment Quarterly (APIQ) Q4/2023 report.
Data released by the Ministry of Planning and Investment showed that as of December 20, total registered foreign direct investment (FDI) in Vietnam stood at nearly $36.61 billion, an increase of 32.1% over 2022.