Mixed-use development boom in Vietnam’s cities

In the year to date, developers have shown a hunger for large, mixed-used spaces in urban areas Photo: Le Toan

In mid-November, Singapore-based CapitaLand announced that it paid $38 million to acquire a new residential project located in Ho Chi Minh City’s District 4. This acquisition is CapitaLand’s 11th project in Vietnam so far.

According to Chen Lian Pang, CEO of CapitaLand Vietnam, 2017 has so far been a record year in terms of growth for CapitaLand in Vietnam, with home sales in the year’s first nine months surpassing those of fiscal year 2016 by close to 50 per cent.

“Beyond the residential market, we have made strategic inroads and expanded our footprint in the country with prime assets in gateway cities,” Chen said.

In September, VinaLand Limited – the real estate investment arm of Vietnam-based asset manager VinaCapital – transferred its stake in VinaSquare, a mixed-use 3.1-hectare development site in Ho Chi Min City’s District 5, to Tri Duc Real Estate for $41.2 million.

In addition, its 182ha My Gia, one of the largest township projects in the central city of Nha Trang, was also unloaded by VinaLand for over $11 million.

In August, Anpha Holdings, a Vietnamese real estate development firm, acquired nearly 100 per cent of Nova Galaxy, a subsidiary of the listed developer Novaland.

In Hanoi, Growing Sun Investment acquired the 4.2ha Diamond Rice Flower complex project from the listed company Kinh Bac City Group.

In a similar move, FLC Group won a bid for the land-use rights of the 6.4ha DM1 land plot, located in South Tu Liem district, for nearly $38 million. They plan to build townhouses, villas, and apartments on the parcel.

According to a recent report released by Savills Vietnam, the Vietnamese property market is trending upward, across all sectors, with a particularly positive outlook for the office-space sector.

With strengthening demand on the back of healthy foreign direct investment and robust GDP growth, Savills Vietnam expects to see extremely low vacancy rates across all office grades, with average rental growth exceeding 8 per cent per annum in the next three years.

Vikram Kohli, executive director of Business Operations and Strategy at CBRE Southeast Asia, said that the real estate market in Vietnam will remain a destination for foreign investment – especially from APEC members – in the coming time.

“For developed countries like Japan, South Korea, and Singapore, the profits from real estate projects are not as attractive as they are in emerging countries. Therefore, investors in more developed countries are willing to diversify their portfolios in emerging markets like Vietnam,” Kohli said, adding that the Vietnamese government has recently enacted a policy to encourage foreign investors to join the local market through mergers and acquisitions (M&As).

However, in order to make the M&A market in real estate more attractive to foreigners, there needs to be more product diversity to provide foreign investors with more choice. Furthermore, increased transparency and legal protection for contracts are also needed to properly develop the M&A real estate market, which has seen increased participation from foreign developers in Japan, South Korea, and Singapore. These buyers are interested in large-scale mixed-use developments comprised of apartments, serviced apartments, retail, and office space in Hanoi and Ho Chi Minh City.