According to Investing.com, investment in the industrial real estate market reaches $1 billion

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©Reuters

According to Donghai

Investing.com – As of the end of August 2023, the amount of newly registered foreign direct investment (FDI) increased by 69.5% year-on-year, reaching US$8.8 billion. The Vietnamese government deployed monetary policy to promote overall economic stability, and public investment increased by 23.1% year-on-year, reaching US$14.5 billion in the first eight months of 2023.

Since April 2023, exports have grown steadily, with a significant month-on-month increase of 7.7% in August. U.S. inventories fell to 10% in August, which is good for production demand as the United States is one of Vietnam’s largest exporting trading partners. Therefore, industrial real estate continues to be an area driving real estate investment.

The industrial real estate market continues to see “huge” value investment deals, creating a bright future for this segment.

  • In July 2023, Japan’s Sumitomo Group signed a memorandum of understanding with Thanh Hoa Province to develop an industrial park covering an area of ​​650 hectares with an investment of US$400 million. The group is also considering developing a 300-hectare industrial park in Nam Dinh province.
  • Also in July 2023, Suntory Pepsi Hyosung Group (Nasdaq: ) has received approval to build a new factory in Long An with a total investment of US$185 million. Hyosung Group plans to invest nearly US$1 billion to build a carbon fiber factory in Vung Tau.
  • Likewise, as of August 2023, three new projects in the Vietnam-Singapore Industrial Park (VSIP) have begun implementation, two projects have received investment approval, and 12 development cooperation agreements have been signed.
  • Meanwhile, Lineage Logistics and SK Logistics announced a joint venture to improve and expand Vietnam’s cold storage system.

Neil McGregor, managing director of Savills Vietnam, said manufacturing, trade and services will continue to be the driving force for Vietnam’s economic growth, while real estate mergers and acquisitions are also becoming increasingly active.

JLL Vietnam experts stated in a recent M&A market assessment report that during the growth period (2014 to 2018), thanks to good land development, project implementation and sales capabilities, most high-quality assets were in the hands of domestic companies . But it also discourages foreign investors from participating in developing new land.

However, despite the rising interest rate environment and tighter access to capital, transaction prices have not fallen as sharply as expected, according to a JLL representative. Over the past decade, the high cost of buying and holding property has left landlords with little opportunity to significantly reduce prices. Although investment interest remains due to the market’s long-term growth potential, a lack of flexibility in price negotiations has led to a slowdown in market trading pace recently.

Data from the Vietnam Association of Real Estate Agents (VARS) shows that the number of foreign investment groups interested in acquiring real estate projects has increased sharply. Prominent among these are groups of external investors from Singapore, South Korea, Taiwan, Japan, Malaysia… However, most new deals are in the evaluation and negotiation process.

The reason is that the buyer has the upper hand in terms of cash flow, so he often bargains and just wants to buy at a low price. On the seller’s side, it is difficult for companies to accept selling assets at a low price. Cheap price after spending too much. Substantial effort and expense goes into creating land funds, programs and legal implementation.

This background therefore provides ideal conditions for foreign investors to acquire projects more easily and at “softer” prices.

In terms of resources, foreign investors have a greater advantage in terms of funding potential when participating in the Vietnamese real estate market. Often, these organizations are backed by large companies in many countries, where they have access to capital more cheaply than domestic investors.

The large influx of foreign capital into the real estate market has triggered concerns that domestic corporate projects will be acquired at low prices. But reality shows that the era of “big fish swallowing small fish” has passed, and cash flow is now more inclined to cooperate with investment rather than “direct buying and selling”.

Therefore, analysts believe that foreign cash flow brings more positive factors than negative factors. In fact, if we look at it from a competitive perspective, more foreign participation will help increase transparency, improve quality and diversify projects. This is also the motivation for domestic investors to strive to compete and upgrade projects when the market returns to a stable development track.

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