Industrial real estate increases M&A attraction

A recent report from CBRE Vietnam said that the Southern and Northern markets respectively recorded 450,000 m2 and 752,000 m2 of new warehouses coming into operation in the first 9 months of the year. It can be seen that the Southern logistics market entered the last months of the year with positive signs of demand recovery. Notably, the newly signed lease contracts are a continuation of scale expansion from existing manufacturers, 3PLs (logistics service providers) and e-commerce.

Impressions of production shifting trends
 
Notably, in the first 9 months of 2023, tenants from China, Japan, the US and the EU are investors actively looking for industrial land and warehouses in the Vietnamese market, accounting for about 70-80% of the total number. Ask to rent to CBRE Vietnam in the Southern and Northern regions. In particular, a prominent trend that has continued in recent years is that large Chinese solar companies are expanding production in Vietnam, not only to penetrate the Southeast Asian market but also to bicycle to enter the European and American markets more easily.

The above numbers show that industrial real estate is the brightest spot in the context of the Vietnamese real estate market in a completely quiet period. In 2023, along with the wave of shift in the global production supply chain to competitive production centers in Southeast Asia, Vietnam's industrial parks continuously add supply. According to statistics, this year, 397 industrial parks were established with a total land area of ​​122,900 hectares.

Of these, 292 zones are in operation with a total area of ​​more than 87,100 hectares. Another 106 zones are being built with a total area of ​​35,700 hectares. Savills' recently released report shows that industrial parks nationwide have an occupancy rate of over 80%. Northern key provinces reached 83% and southern key provinces reached 91%. Although the additional supply is large, rents still increase. For example, in the North, rental prices increased by 30%, reaching an average of 138 USD/m2 per rental cycle, from 102 USD last year.
 
The survey shows that only Long An and Ba Ria - Vung Tau have many vacant spaces for rent and the market is in dire need of new supply in Binh Duong, Dong Nai, Long An... CBRE forecasts in the next 2 years , industrial land rental prices in Vietnam are expected to increase by 6-10%/year in both the North and the South. Positive demand comes from many industry groups and many nationalities, helping to boost rents in many localities. Along with that, ready-built warehouse rental prices are forecast to increase slightly by 2-4%/year in the next 2 years.

Along with optimistic development momentum, industrial real estate is also creating attraction for many M&A deals along with the growth of foreign direct investment (FDI) flows. As of November 20, according to the Ministry of Planning and Investment, total foreign investment capital registered in Vietnam reached nearly 29 billion USD, an increase of 14.8% over the same period last year. Of which, investment capital through capital contribution and share purchases reached nearly 5.97 billion USD, an increase of 46.4% over the same period in 2022.
 
Accelerate presence through M&A
 
The industrial real estate market recorded outstanding M&A deals such as ESR Group Limited spending 450 million USD to increase ownership at BW Industrial Development Joint Stock Company (BW Industrial). Previously, Frasers Property Vietnam (FPV) announced a cooperation with Gelex Group to deploy industrial parks in the North, with a total first-phase investment of about 250 million USD. Or the deal of Hon Hai Precision acquiring project land in Quang Chau Industrial Park with a value of 60 million USD; Phat Dat Real acquired 31.8% shares of Phat Dat Industrial with a deal value of 27 million USD...

Cushman & Wakefield forecasts that there will be a large amount of capital from foreign investors pouring into the Vietnamese real estate market in the period 2024-2026, many transactions have been in the negotiation process and are quite active. pole.
 
Businesses have increased as over the years, Vietnam has been positioned as a prospective destination to become a manufacturing center in the region. In addition, according to Mr. Ivan Alver, Co-Chairman of Global M&A Partners, Vietnam also promises to be a consumer market with a growing middle-class population that attracts M&A opportunities from foreign investors. such as FMCG - retail, manufacturing - food processing, logistics - warehousing, finance - fintech...

S&P Global released the report "The Big Picture: M&A Outlook 2024" showing that although global M&A activity has slowed down for most of 2023, there are many potential factors pushing deal makers to make a breakthrough. increase next year from domestic and foreign factors. In particular, Vietnam's industry will benefit from many free trade agreements (FTAs), creating a diverse investment base and increasing investment in manufacturing and industrial real estate.
 
Mr. Marco Forster, Head of ASEAN Consulting, Dezan Shira & Associates investment consulting firm, said that many investors and developers are promoting M&A to quickly strengthen their presence in the Vietnamese market. . This trend takes place in the context that Vietnam has just established a comprehensive strategic partnership with the US and Japan, thereby promoting new investment flows from these two countries into Vietnam and will also stimulate further investment. investment capital flows of businesses from other countries.

"With the country's economic growth rate and stable political environment, FDI capital flows are expected to continue to maintain growth momentum in the long term, especially in the manufacturing sector," Mr. Nguyen Cong Ai, Deputy Chief Executive Officer, said. General Director of KPMG Vietnam Company, said. KPMG representatives also acknowledged that this leads to increased demand for industrial real estate and logistics infrastructure in neighboring provinces of Hanoi and Ho Chi Minh City, where land funds are still relatively abundant. Therefore, M&A in the industrial real estate sector can become a key strategy for units that want to take advantage of those changes.

Businesses have increased as over the years, Vietnam has been positioned as a prospective destination to become a manufacturing center in the region. Photo: Kinhbaccity.vn

However, many experts assess that industrial real estate in Vietnam still has many challenges to solve. That is, transportation infrastructure is expanding rapidly, but development has not yet met the pace of economic and social growth. Besides, when shifting the focus to attracting industries with high added value and increasing productivity to be on par with countries in the region, the demand for skilled labor will increase but Vietnam has not yet respond promptly.