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Rising rental prices to boost industrial real estate shares this year
Vietnam News - 2/26/2024 2:39:24 PM
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 Expected higher land rental prices this year will benefit the performance of listed industrial real estate companies and their shares.
The availability of land in industrial parks should remain constrained in 2024 due to challenges in land valuation, the conversion of agricultural land to industrial land through auctions and difficulties in land compensation and resettlement, according to SSI Research.
Currently, several listed industrial park investors have signed Memorandums of Understanding (MoUs) in the second half of 2023 for leasing industrial land to new tenants. As a result, these agreements will be converted into official contracts and recorded as revenue in 2024.
However, there are currently around 34 industrial parks in the process of completing their legal procedures, and seven industrial parks undergoing accelerated land clearance in provinces such as Hải Dương, Thái Nguyên, Thái Bình, Bà Rịa - Vũng Tàu, according to the latest assessment by FPT Securities (FPTS).  
Therefore, the nationwide supply of industrial park land is expected to reach 142,000 hectares in 2024, an increase of 12,000 hectares, or 9 per cent from last year. The expansion will contribute to a significant 36 per cent increase in the available land area for leasing compared to 2023.
On demand side, the northern region is forecast to experience high demand for industrial park land leasing this year, driven by the shift in production facilities, particularly in the electronics and semiconductor sectors, said SSI Research. 
In the southern region, there is also an improvement in the demand for industrial park land from manufacturing companies in textiles, wood, leather shoes, logistics, and the food and beverage industry. 
As the supply is still insufficient, it is expected that the average land rental prices for listed industrial park investors will increase by 15.5 per cent year-on-year in 2024. 
Meanwhile, FPTS said that the rental prices for industrial park land in tier 1 markets are projected to increase by 4 per cent in the North and 7 per cent in the South this year. 
The tier 1 markets in the northern region include Hà Nội, Bắc Ninh, Hải Dương, Hải Phòng and Hưng Yên Provinces. In the southern region, they encompass HCM City, Bình Dương, Đồng Nai, and Long An Provinces.
According to the securities firm, the trend of rising industrial park land will persist in the long term, aligning with the Decision on the allocation of targets for national land use planning in the 2021-2030 period and the vision until 2050, as well as the national land use plan for the five-year period of 2021-2025.
Map of the Tràng Cát Urban Area project. — Photo kinhbaccity.com.vn
Given positive forecasts on industrial park rental prices, several listed companies involved in the sector, such as Kinh Bac City Development Holding Corporation (KBC), IDICO Corporation (IDC), and Sonadezi Châu Đức Shareholding Company (SZC), are poised to benefit.
For KBC, the Tràng Duệ 3 Industrial Park, spanning a vast area of 687 hectares in An Lão, Hải Phòng Province, will contribute to its overall business performance as early as 2024. Despite the ongoing completion of legal procedures for the project, there are already prospective tenants eagerly awaiting approval to lease the land. 
This is primarily due to the industrial park's advantageous geographic location within the Đình Vũ - Cát Hải Economic Zone, which offers more favourable tax incentives.
KBC is also actively advancing the development of the Tràng Cát Urban Area project, covering nearly 585 hectares in Hải Phòng City, with a total estimated development budget of over VNĐ11.3 trillion (US$460.3 million). The entire land area has already been transferred to the company by the Hải Phòng City People's Committee. 
In the fourth quarter of 2023, KBC successfully handed over 10 hectares of land and cleared 108 hectares of remaining land in the Nam Sơn Hạp Lĩnh Industrial Park (Bắc Ninh Province), as well as delivered 18 hectares of land in the Tân Phú Trung Industrial Park (HCM City). 
Additionally, KBC is set to lease out the remaining 22 hectares of land in the Quảng Châu Industrial Park (Bắc Giang Province), effectively achieving full occupancy of the industrial park.
Regarding IDC, the company has signed MoUs and lease contracts at the Hựu Thạnh Industrial Park in Long An Province since the second half of 2023. The leased area spans 35 hectares, a 35 per cent increase from 2023.
For SZC, despite operating primarily in the Châu Đức Industrial Park, the company still has potential for stable business operations for 8-10 more years. With approximately 500 hectares of unleased land and improving infrastructure, there is room for increasing rental prices in the future.
Nevertheless, according to SSI research, industrial real estate companies may encounter difficulties with the implementation of the global minimum tax on January 1, 2024. 
This could lead to a reduction in the tax incentives previously provided to tenants in industrial parks, including a two-year corporate income tax exemption and a 50 per cent tax reduction for the subsequent four years.
On the stock market, shares of these companies performed well on Thursday. Particularly, IDC and SZC soared 2.12 per cent and 1.07 per cent, respectively, while KBC ended flat at VNĐ31,750 a share. — VNS
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