Demand for industrial park real estate is expected to increase sharply thanks to attracting new customers.

SSI Research believes that FDI flows will continue to grow, even when new US tax laws are applied.

SSI Research believes that FDI flows will continue to grow, even when new US tax laws are applied.

According to a recent analysis report by the analysis department of SSI Securities Corporation (SSI Research), the growth of FDI capital inflows into Vietnam has maintained its growth momentum over the past 10 years, thanks to the trend of production shifting. Countries such as Singapore, Taiwan, and China are the main contributors to this growth. The reason is that Vietnam has a competitive advantage in terms of favorable investment policies, low labor costs, and a stable economy .

According to the Ministry of Planning and Investment , from 2019 to 2023, industrial land leasing activities in Vietnam have had positive growth with the area of MOUs and newly signed agreements reaching a compound annual growth rate (CAGR) of 35%. This growth mainly comes from large FDI enterprises such as Samsung, LG, Hyundai, Lotte, Luxshare, Lego, Hyosung and Foxconn, aiming to diversify production and minimize risks in the global supply chain. Average rental prices have also increased significantly, with industrial parks in the North increasing by 35%, while industrial parks in the South increased significantly by 67% from 2020 to Q2/2024.

Companies with large available areas for lease such as SIP, IDC, VGC, SZC, KBC, NTC

However, in 2024, FDI inflows into Vietnam will slow down. In the first 10 months of 2024, total registered FDI reached 27.26 billion USD, up only 1.9% over the same period. In the short term, FDI enterprises may wait to see President Trump's new tariff policies, including tax laws affecting imports from Vietnam.

During his 2024 presidential campaign, Mr. Trump emphasized trade measures to protect the American economy. These included a 60% tariff on Chinese goods to reduce the trade deficit and promote domestic production. Along with the usual tariffs of 10-20% on other countries to protect American industries from foreign competition.

The campaign’s statements indicate a shift toward more protectionist policies, which leaves policies on imported products unclear. In the short term, FDI enterprises may wait for more specific information on Trump’s new tariff policies, including tax laws affecting imports from Vietnam.

Explaining the slowdown in FDI capital flows into Vietnam’s industrial park real estate sector in 2024, experts from SSI said that a major factor is exchange rate fluctuations. Exchange rate fluctuations can affect project efficiency, leading to FDI enterprises hesitating in making new investments.

Second, SSI Research also emphasized the need for reforms in FDI policy to attract foreign capital into target industries. Currently, Vietnam is competing to attract FDI with neighboring countries such as Indonesia with the Omnibus Law issued or Thailand also has a fund to improve competitiveness and applies a corporate income tax of 10%.

Third, infrastructure in Vietnam is limited, especially in the southern region. Slow progress in infrastructure construction, leading to higher logistics costs, may make investment less attractive.

Finally, according to experts from SSI, the remaining available area for lease in major industrial zones is not much. This makes it difficult for investors to choose investment locations: According to CBRE, the average occupancy rate reached 81% in the North and 92% in the South by the end of June 2024.

There is not much remaining available space for lease in major industrial parks.

However, SSI Research also emphasized that the Government is taking actions to resolve bottlenecks to attract FDI inflows, including researching and establishing support mechanisms for large enterprises affected by global minimum taxes; proposing a Digital Technology Industry Law with incentives for investment in semiconductor manufacturing enterprises. The Government will also amend some provisions in the current Investment Law so that Provincial People's Committees can issue investment certificates for new industrial parks. In addition, improving infrastructure to connect industrial centers, such as the North-South Expressway and the railway connecting China and Vietnam, is also a positive factor. Therefore, SSI Research expects FDI inflows to continue to grow, even when new US tax laws are applied.

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The implementation of new land price lists in many localities from the end of 2024 has led to a significant increase in compensation costs for site clearance in new industrial parks. This will cause increased costs to reduce the profit margin of new industrial park projects to 30-35%, compared to more than 50% in existing industrial park projects.

Source: https://baodautu.vn/batdongsan/nhu-cau-bat-dong-san-khu-cong-nghiep-du-kien-tang-manh-nho-hut-khach-moi-d230006.html