Industrial real estate became hot thanks to M&A


Industrial real estate is heating up thanks to many effects at the same time.

Demand increased


Vietnam industrial real estate is facing many great opportunities from the US-China trade war, the wave of movement to Vietnam of large corporations... This segment also becomes more exciting when FDI inflows continue to pour into Vietnam.


In addition, Vietnam has been developing its economy in the direction of focusing on exports, especially industrial products. The establishment of key economic zones and participation in trade agreements, especially EVFTA between Vietnam and the EU, will create a driving force to increase capital flows as well as the demand for Vietnamese industrial real estate.


After the first 6 months of 2019, FDI inflows into two main segments, manufacturing and real estate. This capital inflow acts as a driving force for the development of this segment, as well as imposing requirements on the corresponding real estate to provide manufacturing and processing workshops.


In addition, the trade conflict between the US and China is still unpredictable, many foreign investors have begun to shift to Southeast Asian countries, including Vietnam, which will create conditions for Vietnam to receive more FDI projects, especially in the manufacturing, logistics, real estate industrial zones. In the first 6 months of 2019, a number of FDI projects in industrial parks were listed as USD 260 million of registered investment capital invested by Goertek Hongkong and Bac Ninh. Earlier in 2016, LG Display Hai Phong adjusted to increase its investment capital by 500 million USD.


Photo: Shutterstock


As observed by experts, Vietnam has been developing its economy in the tendency to focus on export, especially industrial products. The establishment of key economic zones and participation in new generation trade agreements with ever-increasing commitments will create motivation for boosting capital flows and demand in the real estate segment.


Shortcut to enter the market


Ms. Nguyen Hoai An, Director of CBRE Hanoi, said that at the present time, there is a lot of interest from the parties in the segment of industrial real estate and M&A activities as well as buying and selling projects or land. With interest from international investors and the shift of production chains to a developing economy and with low labor costs such as Vietnam is expected to further boost demand and M&A activities of industrial real estate in the future


A typical example is 2018 recorded a warehousing transaction at VSIP 1 Binh Duong. Accordingly, Mapletree Logistics Trust has spent US $ 31.26 million to acquire the warehouse of Unilever International Co., Ltd.


As with other M&A deals in other segments, the goal of M&A and the sale or purchase of land or industrial real estate projects is a rapidly growing strategy for investors.


Unike M&A of other real estate segments, in order for a real estate M&A deal to be really successful, investors are often responsible for infrastructure investment, ensuring job creation for the local. In particular, the investment in industrial real estate also contributes to the added value of other real estate segments such as retail, residential houses of that locality.


Typically, the scale of industrial real estate projects is also relatively large compared to other areas such as retail or office space. Buying and selling industrial real estate often takes place in existing areas and industrial development potentials, around big cities like Hanoi and Ho Chi Minh City. These areas have good transport connections to warehouses and wharves, which are an important factor to evaluate the potential for acquisition.


According to Mr. PAUL TONKES, Director of Industrial and Logistics Services, Cushman & Wakefield Vietnam, e-commerce, a rapidly growing market in Vietnam, will bring more investment capabilities to some Investors. This allows investors to consolidate their real estate and build large centralized centers.


The role of locality


Giving advice to localities, according to Ms. An, in order to take advantage of the investment wave through M&A activities, localities may need to consider to create favorable conditions for investors, especially the flexible investment policy, reducing administrative procedures and promoting prevention of commercial fraud. At the same time, the design and enhancement of tax incentives, rents along with the development of the most optimal infrastructure, strengthening the connection between key projects.


According to Mr. PAUL TONKES, localities need more transparency and consistency in policies. The global trend is shifting away from capital to build a new business (Greenfield) to already built projects and buildings (Brownfield FDI). This trend will occur in Vietnam more and more. Despite geopolitical concerns, global expansion and new market entry remain the main reason for the acquisition.


M&A has often been seen as a tool for securing the supply chain and responding to unfavorable taxes and trade barriers, now starting to become a reality. However, M&A projects are often delayed on transparency issues, such as land use rights and lack of expertise or skills.


Also according to the representative of Cushman & Wakefield Vietnam, more and more projects calling for investment of the Government are made public and investors. Along with that are seminars and programs to attract investment from ministerial-level agencies such as the Ministry of Planning and Investment, the Ministry of Finance... and localities.


In addition to the huge opportunities offered, these programs are also a high political commitment to a more open and open investment environment.


The 11th M&A Vietnam Forum in 2019, jointly organized by the Vietnam Investment Review and AVM Vietnam under the auspices of the Ministry of Planning and Investment, will be held at the GEM Convention Center (HCMC) on Thursday, August 6, 2019.


With the theme of "Going for breakthrough", Vietnam M&A Forum 2019 will discuss M&A opportunities in the new era and the changes needed for Vietnam's M&A market to really break through and bring benefits for the participants.


The main M&A Forum in Vietnam will have the following main activities: Main conference with leading speakers from Vietnam and internationally; Honor the typical M&A consultant 2018 - 2019; Issue of M&A Market Overview Special Issue 2019 - 2020; International training course on M&A strategy for breakthrough growth.


According to Thanh Huyen