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Last updated: Tuesday, January 17, 2017
Foreign Developers Casting Radical Influence on Vietnam Real Estate MarketPosted: Monday, December 05, 2016
“Looking toward the highest specified projects across residential, retail, office and industrial they are largely developed by, or rely heavily on, foreign influence throughout the design and construction phase,” said Mr Alex Crane, General Manager of Cushman & Wakefield Vietnam in an interview with Vietnam Business Forum. Giang Tu reports.
What do foreign developers contribute to the Vietnam real estate market?
The most obvious is probably in raising the quality of product through design, construction and technology. Looking toward the highest specified projects across residential, retail, office and industrial they are largely developed by, or rely heavily on foreign influence throughout the design and construction phase.
Each time a new high standard of quality has been set and it happens quite regularly it has been by a foreign developer or investor. Projects that best hold value are also typically by foreign developers which is a testament to foresight in design but also management, upkeep and service which is becoming a more important consideration for occupiers & buyers.
One of the main recent examples has been a shift to more environmentally considerate design and construction; not only is this a benefit environmentally but it is often also a byword for quality and project longevity and lifespan. In the commercial sectors this was first led by foreign developers and demand from foreign occupiers.
Developers from which country are currently the most active in the Vietnam real estate market?
The most active remain Singaporean, Japanese and Korean groups equally through development and M&A. We are seeing continued interest from companies that are already active in Vietnam and those looking to enter for the first time.
Recently Thai groups have been more active in Vietnam particularly in the retail sector which in my opinion is the sector most in need of improvement, hopefully more quality will follow with more foreign expertise and influence.
New foreign developers prefer 100 per cent ownership, could you explain reason?
Many foreign groups would actually prefer to own 100 per cent of their projects, but as the market has become more competitive in recent years they have had to engage more with local companies in joint ventures. Often local companies hold the best land and foreign groups find it difficult to compete for access and speed to acquire opportunities.
There is often little incentive for local groups to dispose of sites outright and have better opportunity now to partner with experienced foreign groups. Large-scale projects - in particular in Ho Chi Minh City – are now more often formed by JV’s; this trend will continue.
What can you comment on the cooperation between local and foreign developers, and quality of high-end projects provided by them?
When being asked only a few domestic enterprises in Vietnam cooperated with foreign partners to develop high-end projects because of high profits, we noted that for some local developers, there is limited benefit to partner with a foreign partner. A partnership is founded on the value that each party can bring to the other, i.e capital and/or knowledge. Some local developers do not need to partner with foreign partners as they do not need Capital & have the depth in knowledge to adequately service their market. However there are also many local developers who wish to partner with foreign partners who are able to add value to the project that they are developing.