Strong FDI capital boosts growth in industrial real estate and serviced apartments

DNHN - The increase in FDI inflows into Vietnam has attracted many international experts, raising the demand and rental prices for serviced apartments. Simultaneously, the wave of high-tech FDI has boosted demand for green factories and industrial zones.

Vietnam is currently an attractive investment destination for foreign direct investors (FDI) thanks to its political stability, steady economic development, and competitive labor costs. According to statistics from the Foreign Investment Agency - Ministry of Planning and Investment, as of the end of June this year, total foreign direct investment in Vietnam reached 15.2 billion USD, an increase of 13.1% compared to the same period last year. Vietnam is also poised to receive a fourth wave of FDI, focusing on high-tech sectors such as semiconductors, electronics, and renewable energy.

In the context of abundant FDI capital, certain real estate segments have shown outstanding growth, including serviced apartments and industrial real estate.

Growth in serviced apartment segment in Hanoi driven by FDI

According to Savills' first-half 2024 report, the supply of serviced apartments in Q2/2024 reached 6,096 units, up 0.3% compared to Q1/2024. The occupancy rate reached 83%, a slight increase of 1 percentage point quarterly and annually. The average rent for these residential products also reached a better level, at 601,000 VND/m2/month, an increase of 4% quarterly, and 5% annually.

Currently, two-bedroom apartments account for 58% and 53% of the demand for serviced apartments in the central area and other areas, respectively. Meanwhile, most tenants in the western area prefer smaller apartments, such as studios or one-bedroom units.

Matthew Powell, Director of Savills Hanoi, commented on the impact of FDI on the serviced apartment market: "Foreign capital inflows into Vietnam have attracted many international experts, creating a key customer segment for the serviced apartment market. They often choose to rent serviced apartments managed by international operators, meeting many quality service requirements."

Infrastructure development also plays a significant role in increasing the attractiveness of the serviced apartment segment. According to Savills' report, Hanoi plans to accelerate the implementation of key projects, including Thuong Cat Bridge, Van Phuc Bridge over the Red River, the eastern collector road of the Phap Van - Cau Gie highway, and the My Dinh - Ba Sao - Bai Dinh road connection. These roads are expected to reduce travel time from central Hanoi, where many serviced apartments are concentrated, to nearby industrial zones.

To meet the increasing market demand, from 2024, about 5,909 serviced apartments will be provided from 17 upcoming projects. Notable projects include PARKROYAL Serviced Suites Hanoi, Epic Tower, Fusion Suites, and Tay Ho Complex. Additionally, Swiss-Belhotel International, an international operator, will enter the Vietnamese market through the Epic Tower project. International operators are expected to account for 55% of the total future supply of serviced apartments to meet demand.

Industrial real estate potential amid the fourth wave of FDI

According to the Foreign Investment Agency's announcement on foreign capital attraction in the first six months of 2024, 70.4% of total FDI capital is concentrated in the processing and manufacturing industry. At the same time, Vietnam is poised to receive a fourth wave of FDI, which may focus on high-tech fields such as electronics, semiconductors, artificial intelligence, and renewable energy. The development of these fields directly impacts industrial real estate due to increased demand for factories meeting good infrastructure and service requirements.

The need to diversify supply chains among investors, as placing factories in China is no longer the optimal cost choice, also helps Vietnam become a destination considered by many investors. Recently, Nvidia from the US committed to making Vietnam a new technology hub with an agreement worth 200 million USD; Hana Micron from Korea and Intel with projects worth billions of USD.

Regarding development areas, according to data from the Foreign Investment Agency, Bac Ninh remains the preferred destination for investors, with a total registered investment capital of 2.58 billion, accounting for 17% of the country's total. Ba Ria - Vung Tau ranks second with 1.54 billion USD, and Quang Ninh ranks third with 1.36 billion USD. Next are Hanoi, Hai Phong, and Ho Chi Minh City.

Thomas Rooney, Senior Manager of the Industrial Real Estate Department at Savills Hanoi, said: "The biggest issue currently facing industrial zones is energy. Some investors require large energy levels, up to 10-30 megawatts. This is quite difficult to meet for industrial zones at the present time."

To address the electricity transmission issue soon, the government has planned to implement the Quynh Lap Thermal Power Plant project in Nghe An province, with a capacity of 1,500 megawatts, expected to be operational in 2029-2030. These efforts are noteworthy to maintain the attractiveness of the Vietnamese market to foreign investors.

Additionally, Thomas shared that industrial zones need to pay attention to the green trend to increase attractiveness to investors: "Developing green industrial zones is a trend not only in Vietnam but globally. Therefore, more and more investors are focusing on a circular economy. Vietnam aims to achieve net-zero emissions by 2050. Therefore, the demand for green industrial real estate comes not only from sustainable development in the manufacturing sector but also from government requirements. The biggest obstacle currently may be financial and regulatory issues. However, investors will certainly cooperate to resolve them in the future."

Based on primary data from working with clients, Thomas estimates that about 80% - 85% of foreign investors have ESG standards requirements. At the same time, Vietnam is adapting to this trend. According to data from the Ministry of Planning and Investment, by 2030, about 40% - 50% of provinces nationwide will plan to convert existing industrial zones into eco-industrial zones, and 8% - 10% of provinces will aim to build new eco-industrial zones.

Nghe Nhan