TPP Will Create Breakthrough for Vietnam’s Commercial Real Estate Sector

  On October 5^th, the TPP agreement has finished negotiation. According to experts, the signing of TPP will expand the opportunity for Vietnam's economy in general and real estate market in particular.

It seems that foreign real estate investors are more sensitive hearing than domestic investors in the anticipation of macroeconomic policy. The most recent example, funds from Japan and the United States are massively investing in the real estate market of Vietnam. These includes Creed Group (Japan) committed to invest 200 million USD into the An Gia Investment or the Global Emerging Market - GEM (US) has recently committed to pour 20 million USD into Hoang Quan real estate company.

Currently, there is a capital inflow from Japan landing in Vietnam. Many Japanese firms have invested in clean agriculture in Japan and some areas in the Northern of Vietnam to grow fresh vegetables and then export back to Japan. The Japanese are very closely following the TPP negotiation process so they also have investment plans in advance.

After the TPP was signed then what people expect the most is the commercial real estate market will develop better, which include industrial park, office, retail space...as a result of the shift of investment capital flows.

In order to leverage the special tax incentives and cheap labor cost in Vietnam, a lot of businesses in Japan, US had planned about moving factories from China to Vietnam and exported to Japan, US... The main industries that are shifting include textiles, phone manufacturers, automobile manufacturers.... The capital flow shifting will push up demand for commercial real estate.

When the foreign enterprises arrived in Vietnam, they will have to build factories, warehouses. On the other hand, they would create jobs, generate demand for ancillary and service industries. Thus, the system of services like hotels, trade centers, office rental and other services will develop as a result.

Thus, we can also expect M&A in the field of hotel, office, retail, including resort real estate will thrive in the future. Moreover, after the success of TPP, it will push up the industrial real estate market to develop.

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Japan Pouring Capital into Vietnam Real Estate Market

   Vietnam real estate market has seen a growing funds poured into the real estate market through signning partnership agreement with Vietnam partners or direct foreig own investment in setting up company in Vietnam.

Since 2011, Tokyu Corp of Japan has already had cooperation agreements with Becamex IDC Corp to invest USD 1.2 billion to develop the urban area project of 71ha in Binh Duong new city.  Other real estate business as Thanh Dong has also signed cooperation with many Japanese investors to mobilize capital for investment in a range of real estate projects. Accordingly, Thanh Dong is negotiating with a private equity fund in Osaka to cooperate investment in 3 major projects of this company in Hai Duong. Besides, Thanh Dong has also reached agreement with Handa Global (Yokohama) on contributing capital to build a 5 star hotel complex in Nha Trang - Dien Khanh urban area and a sea villa complex in the urban area of trade, tourism and financial services in Nha Trang city center. The total committed value between Thanh Dong and Handa Global reach 200 million USD.

Earlier, Japanese investors are willing to invest in golden lands at Le Duan - Hai Ba Trung (District 1 - HCMC) to construct a building for the Japanese investors which are growing fast in numbers in Vietnam. In addition, Sumitomo Corporation is exploring the investment projects in Thu Thiem commercial and financial center in the area of 20ha.

In the segment of industrial real estate, industrial park in Dong Nai was developed by Donafood Vietnam and three Japanese partners: Sojitz Corporation, Daiwa House Co., Ltd and Kobelco Eco-Solution. With the 88% joint-venture cooperation, the Japanese companies and local partners will invest USD 100 million in this segment.  In HCM City, Vietnam – Japan industrial zone with an investment of USD 31 million has just been inaugurated phase 1.

In particular, the Mekong River Delta (MRD) is a new target of Japanese businesses, not only in the field of real estate but also logistics and seaports. Japanese investors are looking forward to be introduced by Can Tho’s authority agencies the position that they can invest in an industrial zone exclusively for Japanese businesses to invest in tourism, trade and services. It is reported that the Saporo Japan Corporation is also exploring opportunities to cooperate and invest in a golf course and ecological urban area in Can Tho and cooperative investment in some other areas of the group's strengths in some provinces in the MRD.

Commenting about this trend, Japanese investors said that Vietnam's economy continues to have the prospects and potential for development, and Vietnam will become an important destination to attract more business delegations and Japan’s leading investors in the coming years.  The according to Mr. Toshihiko, the chairman of Creed Group said: "This is just the first step in cooperation, if the real estate market of Vietnam developed well, we will pump hundreds of millions of USD to not only An Gia Investment, but also into many other partners". He further said, Vietnam's economy is integrating deeper into the world economy. The Vietnam government is interested to complete the negotiations of TPP agreement, which will open huge opportunities for the economy; attracting major international investors. Besides, Vietnam has young population, mainly concentrated in urban areas however modest housing fund will be huge growth opportunity for the real estate sector. Meanwhile, the law on land of Vietnam is becoming more transparent and open to foreigners to buy houses, create purchasing power and investment opportunities for domestic and foreign enterprises.

Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.

Vietnam’s Tourism Real Estate Sector

   According to forecasts, in the next 5-10 years, Vietnam will remain as an attractive destination for foreign investors. In which the tourism real estate sector is preparing to welcome a new wave of investments with large-scale projects.

A report of Capital Partners Group Vietnam shows that in the next 5-10 years, GDP per capita of Hanoi and Ho Chi Minh City will be equivalent to those of some large cities in Southeast Asia. Therefore, beachfront apartments will become the new growth segments.

Mr. Kenneth Atkinson, CEO of Grant Thornton Consulting Group Vietnam claiming that the living standard of people in general are more advanced, the demand for tourism is growing and a lot of foreign investors are heading their attention to resort projects. The demand for hotels, luxury resorts in the long term are remains high, therefore the number of projects in the hotel and resort sectors will continue to increase with more luxury resorts to meet diverse customer demand.

Recently, many localities have also implemented plan and urged local and foreign investors to invest in tourism real estate projects.

For example, recently, Quang Ninh is calling for investors to set-up business and invest in Vietnam for the period from now till 2020, including projects: coastal resorts, tourism, casino...There are some huge projects: Casino and entertainment complex with scale up to 2,000 hectares in Van Don with a total investment of 4-5 billion USD, Phoenix resort projects (Van Don) 250 million USD; Dam Nha Mac Service Industrial Park with 3,170 hectares and 530 million USD…

In Binh Dinh province, Vingroup has built the Hai Giang tourism project, with a total of more than 650 hectares, a total investment of nearly 3,500 billion VND. In 2015, it is expected that Vingroup can supply over 830 seaside villas to the market from three locations: Phu Quoc, Nha Trang and Da Nang.

FLC Group is also preparing to launch the complex project of golf course, resort, villas and high-end entertainment named FLC Nhon Ly in Nhon Ly Commune, Quy Nhon city. The project has a total investment of 3.500 billion VND.

Most recently, M.I.K Company has introduced the Sol House luxury resort project in Phu Quoc. The project is expected to be launched in early 2016, with a total investment of over 40 million USD, including 260 hotel rooms and villas, spa, indoor and outdoor entertainment areas, two restaurants, beach bar...

Mr. Than Thanh Vu, Deputy Chairman of Tourism Real Estate Association also said that recent moves of the Government on reducing the administrative procedures will provide ventilation for the real estate business, real estate market in general and tourism real estate in particular. In the next phase, tourism real estate sector will have a rapid growth.

Furthermore, Mr. Nguyen Nam Son, Executive Director of Capital Partners Vietnam said that: "If in the future, Vietnam can minimize the troublesome administrative procedures, increase Government budget on promoting tourism of Vietnam on international channels, travel trade fairs, open representative offices in foreign countries..., that will help Vietnam tourism industry and tourism real estate sector to grow fast".

"Because investors are lack of information about the policy, project planning therefore they do not know where to invest in, which specific projects, for how long... so the local governments should organize more meetings, dialogues for domestic and foreign investors to exchange with each other and discuss with the leaders of the provinces and thereby make the appropriate investment decisions, "said Mr. Jonathan Tizzard, Department of hotel and resort, Cushman & Wakefield Vietnam.

According to Mr. Jonathan, the coastal localities like Nha Trang, Da Nang, Hai Phong, Binh Thuan, Ninh Thuan will become the most attractive destination in the next 5 years. In particular, the island of Phu Quoc (Kien Giang) has great potential to become a “hot” destination. Phu Quoc is not soon becoming an attractive casino center and tourism in Southeast Asia if the open policy of Government that enterprises can invest in resorts include casino soon to be widely implemented.

Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.