Property boom draws leading firms to invest

Local firms are seeing value in the recent property boom

Faced with difficulties in mobilising capital from investors, nine of the 23 companies listed on the Vietnamese bourse have diverted resources from their core operations into property projects.
The Khanh Hoi Import-Export Company (Khahomex), for instance, is shifting its investment from garment and bag making to property projects.
One of them is a 330-apartment building in District 4’s Ben Van Don Street.
Khahomex chairman and CEO Le Van Truong said his firm had invested nearly VND100 billion ($6.4 million) in the 7,700 square metre Khanh Hoi apartment building project, scheduled for completion in December this year.
The company plans to build two more high-rise office buildings next year, one of them on a 5,000sqm site adjacent to the apartment building and the other on a 3,000sqm site in Ben Chuong Duong Street, near the planned East-West Highway.
Another company in diversification mode is the marine transport company Gemadept, one of the stars of the local bourse. It has chalked out plans for a 25,000sqm office building on Le Thanh Ton Street in District 1.
The building is designed to have 25 storeys, including three below ground level, for office and private lease. Construction on the $18 million project is expected to start in the second quarter of this year and be completed by 2006.
Other firms with realty ambitions include REE, Savimex, Gilimex, and Sacom, which despite having to learn on the job are hoping to make large profits on the investments.
“The demand for accommodation and office space is increasing significantly, so we believe our investments will return profits,” Truong said.
All 330 apartments, to be built from the second floor upwards in the Khanh Hoi project, have already been taken by company staff and shareholders although construction has yet to be completed.
“The project is expected to fetch a net profit of at least VND10 billion ($640,000),” he said.
REE, or Refrigeration and Electrical Engineering Corporation, also has high hopes for its e-Town project in Tan Binh District, an office building earmarked for IT tenants.
The 12-storey building has already leased out 70 per cent of its 30,000sqm to nearly 100 foreign and Vietnamese companies. The company aims to lease 80 per cent of space by June this year.
“We are marketing both at home and abroad to realise the target,” REE chairwoman and CEO Nguyen Thi Mai Thanh said.
Following the success of e.Town, REE plans to team up with a local partner to develop another building in District 4 this year.
The 18-storey building is to include two underground levels for parking, a trading centre and 161 apartments for sale. Total investment is estimated at $9.2 million.
In addition, REE has developed three other property projects, the Maison and IDC buildings in District 1, and Ly Thai To in Hanoi. The two former projects have a 100 per cent occupancy rate, and the latter has passed 85 per cent.
According to real estate consultants, the property market in Ho Chi Minh City will see relentless growth in occupancy rates and rentals.
“There is limited supply of serviced apartments. A lack of supply will allow landlords to raise rates,” a consultant said, adding that some IT-related companies may move to REE e-Town from locations in the city centre.