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Big real estate deals forging ahead
The real estate sector has played a significant role in this year’s investment landscape, with over $5.6 billion registered for capital contributions and share purchases, capturing 18 per cent of the total and 89 per cent higher than the same period last year.
MSCI Real Capital Analytics’ database documented more than 20 publicly disclosed real estate transactions in the first nine months of 2024.
Trang Le, head of Research and Consulting JLL Vietnam
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Despite facing economic headwinds and challenging market conditions, the market demonstrated resilient merger and acquisition (M&A) activity through several large-scale transactions across various sectors, including residential, retail, logistics, and more.
The residential segment continues to attract both domestic and foreign investors, while the industrial real estate sector has emerged as a significant draw for foreign backing. Office, mixed-use, and tourism segments also show positive long-term outlook. This underscores investor confidence in Vietnam’s economy and the property market in particular.
We have observed foreign investments diversifying into new asset types, originating from a broader range of sources, and demonstrating increased emphasis on sustainability factors. These investors are also seeking more expedient processes from local partners.
Sector-wise, various areas are exhibiting differing levels of traction for the upcoming period. Since 2018, the logistics and industrial sectors have established themselves as Vietnam’s most dynamic segments, demonstrating the highest volume of transactions and investment activities over the last five years.
Vietnam’s strategic geographic position, export-oriented economic model, competitive labour costs, and substantial workforce have collectively positioned the country as a rising manufacturing hub within the region. These fundamental strengths are anticipated to sustain the sector’s robust growth trajectory in the foreseeable future. The market of industrial land has also exhibited notable resilience, buoyed by consistent inflows of manufacturing investments into Vietnam.
Despite overall economic headwinds, key industrial hubs have experienced significant performance improvements, characterised by substantial growth in both rental prices and occupancy rates. While industrial parks have been dominated by local developers, leveraging their advantages in land acquisition and local market expertise, the ready-built factory and warehouse segments are witnessing increasing interest from foreign institutional investors, who are progressively expanding their portfolios in these areas.
Emerging sub-sectors such as cold storage and data centres are also gaining traction among foreign investors, who view these as increasingly attractive investment opportunities within the industrial real estate landscape. In May, for example, VNG Corporation and Singaporean ST Telemedia Global Data Centres announced they would build a 60-MW data centre in District 7 of Ho Chi Minh City.
The influx of foreign investment into recent residential projects underscores the increasing sophistication and scale of housing developments in Vietnam. This trend is evident not only in major metropolitan areas like Hanoi and Ho Chi Minh City, but also in emerging satellite cities, such as Binh Duong in the south and Haiphong in the north.
These developments are strategically positioned to meet the needs of Vietnam’s expanding middle class and address the growing demand for contemporary housing solutions in the country’s rapidly urbanising centres.
In commercial property, meanwhile, Grade A office space remains highly sought after by investors, maintaining stable performance with healthy occupancy rates and consistent demand from multinational corporations over the past decade.
The retail shopping mall segment, despite historical stability, shows solid potential for robust growth in both the near and long term. Vietnam is currently having the lowest retail space per capital in the region, supporting the future growth of this sector.
In the hospitality segment, international capital maintains a strong focus on Vietnam’s 5-star and luxury offerings, showing resilience in the face of lingering pandemic effects. However, the market is poised for intensified competition as local investors are expected to increase their presence and market share.
Elsewhere, healthcare and education are becoming increasingly attractive. Following a robust year of M&A activity in 2023, the healthcare sector continues to entice strategic partnerships, exemplified by the FPT Long Chau and IHH Healthcare Singapore collaboration, aimed at improving access to advanced medical services in Vietnam.
On the education front, the sector is set to benefit from the government’s increasing recognition of public-private partnerships, which is expected to unlock additional land resources and stimulate further investment opportunities.
Northeast and Southeast Asian investors remain the most active foreign players in Vietnam’s real estate market. Japanese investors are notably expanding their presence through increased collaborations with local developers in residential projects. Recent significant partnerships include Nishi Nippon Railroad with Nam Long Group in Dong Nai province, Kim Oanh Group with Sumitomo Forestry, Kumagai Gumi, and NTT Urban Development in Binh Duong province, and Nomura, JOIN, Toshin, and Taisei with Vingroup in the northern port city of Haiphong.
Malaysian developers are also showing heightened interest, with SkyWorld actively expanding its Vietnamese land bank following Gamuda’s successful Ho Chi Minh City acquisition in 2023.
Notably, local investors are increasingly active as buyers, not just sellers as seen in the previous cycle. Despite market headwinds, companies like Kido Group and Muong Thanh Hospitality have demonstrated strong capability in expansion and property acquisition in the first nine months of 2024.
The increased financial capacity of local investors is potentially enhancing market liquidity by broadening the buyer base for local assets. The nature of transactions has evolved, now focusing on mutual benefits and long-term cooperative development. Factors such as sustainable development commitment and aligned long-term business goals are becoming crucial for successful collaborations.
The simultaneous enactment of three key real estate laws in Vietnam promises to significantly reshape the market. These laws aim to harmonise regulations, resolve conflicts, and establish clearer implementation mechanisms.
The new Housing Law enhances transparency and simplifies procedures across project phases, boosting investor confidence. The new legislation is expected to unlock supply by resolving legal issues for numerous projects, while promoting social housing and old apartment renovations. Meanwhile, the Land Law introduces opportunities for undeveloped land projects, potentially increasing clean land supply.
While short-term challenges exist as it takes time for stakeholders to adapt to new regulations and reassess projects, these changes are seen as crucial for sustainable growth in Vietnam’s real estate M&A market. Developers and investors are focusing on regulatory compliance, operational transparency, and strategic adaptation.
2025 is expected to be pivotal for Vietnam’s property market, with clearer visibility on the impacts of local legislative changes and geopolitical shifts on the market. Despite potential constraints, Vietnam’s strong macroeconomic and demographic fundamentals continue to position it as an attractive destination for investment in the region as the economy recovers.
VIR
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