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Three Factors Impact The Prospects Of The Industrial Real Estate Industry

Three factors impact the prospects of the industrial real estate industry

Industrial real estate are a segment that is considered to have many prospects, as well as room for growth, in the context of the general real estate market still having many difficulties.

In the report “Debt Capital Market Outlook 2024 – Adapting to change”, FiinRatings believes that the outlook for Vietnam’s industrial park real estate industry will still be maintained at a stable level through three factors: ( 1) High demand thanks to production expansion of both FDI and domestic enterprises; (2) supply is encouraged by the Government to meet growing demand and (3) promoting investment in infrastructure.

In particular, the wave of shifting and diversifying production lines from China is expected to continue to boost investment demand from foreign businesses, thereby further improving the operating efficiency of the entire industry.

The supply of industrial land in Vietnam is expected to increase by 44,760 hectares in the period 2022 – 2025 to meet the sharply increasing demand for industrial land rental in Vietnam. New supply is accelerating expansion in the Red River Delta, North Central and Central Coast.

“The delay in approving policies for industrial real estate in Vietnam is a timely issue when many cities have policies to expand new land funds for industrial parks,” FiinRatings said.

Three Factors Impact The Prospects Of The Industrial Real Estate Industry
Three Factors Impact The Prospects Of The Industrial Real Estate Industry

According to estimates by FiinRatings, Vietnam needs at least 25 – 30 billion USD per year to invest in infrastructure in the next 10 years, equivalent to nearly 600 billion USD until 2040. The government aims to increase participation in infrastructure. private sector participation to ease budget pressures. Although this is the main driver of growth, there are still significant constraints to sustainable development, most notably the scarcity of long-term financial resources.

Currently, commercial banks play an important role as the main source of funding, but the allocation of loans to the infrastructure sector is still relatively modest, usually ranging from 5% to 7% of the total balance. debt at each bank.

In the next phase, the State Bank of Vietnam has introduced restrictions on the ratio of short-term capital to medium- and long-term loans, which could lead to further cuts in infrastructure allocation.

On the other hand, Vietnam’s corporate bond market is still in a new stage of development, with the bond market scale still relatively modest, accounting for only 9.75% of the country’s GDP. This represents a limitation of financial tools so that other financial institutions, such as insurance companies, can participate more actively, becoming a stable source of funding for infrastructure development. .

In the context of many fluctuations such as in the period 2021-2023, industrial park real estate developers still show stable business ability when continuing to attract foreign investment, reflected in the occupancy rate. full of positive maintenance.

With a business model that helps industrial park developers receive large deposits from customers right from the early stages of the project and receive full payment of infrastructure rent for a rental cycle (up to 50 years), the expert group assessed that the financial leverage ratio that this group used to invest was often lower than that of residential real estate developers, leading to a low financial risk assessment. than.

Source: redsunland