M&A deals in the the industrial real estate are forecasted to increase significantly
The trend of buying, selling, and merging (M&A) in the industrial real estate segment is very active in the context of the overall real estate market, which has not shown signs of recovery.
Overview of the industrial real estate market in the second quarter of 2023, according to a report by JLL, shows that industrial land, both in the South and the North, is experiencing a scarcity of new supply, with only over 700 hectares being offered in the first 6 months of 2023, contributing to a total supply of leased land of over 36,400 hectares. Strong investment demand in two major industrial centers has driven the efficiency of operations with strong growth in rental prices and occupancy rates.
In addition to well-established companies continuously expanding their industrial park (IP) projects, the market is also witnessing new players entering the segment. For example, VSIP Group continues to expand its industrial parks. Just in 2023, VSIP Group has been approved to invest in two industrial parks totaling nearly 600 hectares in Lang Son and nearly 300 hectares in Can Tho City.
Binh Duong Minerals and Construction Joint Stock Company is also accelerating the expansion of phase two of the Dat Cuoc Industrial Park, as phase one has already reached 90% occupancy. KN Holdings has received approval from the Prime Minister to invest in the Long Duc 3 Industrial Park in Long Thanh District, Dong Nai Province, in July 2023. This is the first project among three industrial real estate projects of KN Holdings.
According to JLL’s report, the industrial real estate market is starting to attract more investment requirements and new international capital inflows are also showing interest in joining the market, thus investment activities are expected to be more vibrant in the second half of this year.
Some recently announced investments include Frasers Property Vietnam partnering with Gelex Group – a leading diversified investment corporation in Vietnam, to jointly develop an investment portfolio of industrial parks and expand the industrial real estate market throughout the North. The total planned investment is $250 million.
Another example is the Foxconn deal for additional land leasing in Vietnam, with a total value of about $100 million, in the Quang Chau Industrial Zone and WHA 1 Industrial Zone. In addition to Asian investors, the interest of European and American countries in the Vietnamese real estate market is also increasing.
According to the Overview of M&A Market in Southeast Asia and Vietnam report by EY Parthenon, the total value of M&A deals involving enterprises and assets in the real estate and construction sector in the first 7 months of the year in the Vietnamese market reached approximately $1.4 billion. Real estate M&A accounted for 65%, with 24 deals totaling $874 million. Particularly, 16 of these deals were related to M&A in industrial parks. About 92% of the buyers were foreign investors, primarily from Taiwan (China), Singapore, and South Korea.
Experts believe that Vietnam’s attractiveness to new capital flows is due to its openness brought about by FTAs, significant trade benefits, and an expanding market scale for investors. Land rental prices in Vietnam remain lower than in other ASEAN countries.
Public investment in national infrastructure renewal accounts for 52% of the public expenditure plan for 2021 – 2025, which is also an important factor in attracting capital inflows. The trend of industrial real estate M&A in the near future will be of moderate scale but significant in number to expand portfolios in various key locations and meet diverse demands.
Furthermore, a series of existing issues related to the real estate market such as investment activities, legal procedures, and related legal systems are gradually being improved to limit conflicts between regulations within the investment legal framework. This will somewhat remove many existing barriers to real estate M&A activities this year.
According to Bao Bao, Lao Dong Newspaper
