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.

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