Many real estate experts predict that mergers and acquisitions (M&A) in the industrial sector will dominate in 2023, as both supply and demand are ready, making it an opportune time for this segment to thrive.
Industrial real estate is attracting significant attention from foreign investors. Amid a tightly controlled credit environment for real estate, many housing developers face liquidity issues and lack of capital, leading to their exit from the market. In contrast, industrial park developers are relatively secure, backed by unreleased revenue, which provides them with greater resilience to increase investment and expand land funds.
According to CBRE Vietnam, the bright spot of industrial real estate in the first quarter of 2023 is the growing demand for storage capacity and distribution networks from e-commerce and logistics companies. Alongside this is the development of new products to adapt to the new situation, notably the construction of multi-storey factories and the application of technology in factory management and operation, creating a new integrated model of real estate supply and investment support services.
A recent report from Savills Vietnam shows that industrial real estate supply in key economic areas like Hanoi and Ho Chi Minh City is being actively filled. The occupancy rate of industrial parks nationwide averaged 70.9%, equivalent to the end of 2020. This figure is expected to improve in the coming years as rental demand from businesses continues to grow due to the shift of supply chains from China to Vietnam.
This scenario has triggered significant M&A deals in the industrial real estate segment, attracting foreign companies like BW, Logos, SLP, GLP, KTG. A notable deal was BW Industrial Development JSC (a joint venture by Warburg Pincus and Becamex IDC), which announced the acquisition of several new land plots in industrial parks for rental factory construction.
Specifically, in January, BW acquired about 74,000 square meters of land in Bac Tien Phong Industrial Park developed by DEEP C in Quang Ninh. This transaction marked BW’s presence in Quang Ninh and the third consecutive collaboration with DEEP C in expanding in key industrial markets in Northern Vietnam.
In late March, BW continued to acquire 22.6 hectares of land in Vinh Loc 2 Industrial Park (Ben Luc, Long An) and 20.4 hectares in Xuyen A Industrial Park (Duc Hoa, Long An) to construct warehouses for rent. In Q2 2023, the company plans to offer approximately 213,000 square meters of two-story built-to-suit warehouses at Vinh Loc 2 Industrial Park, and in Q4 2023, about 220,000 square meters of similar products at Xuyen A Industrial Park.
Interestingly, the pursuit of M&A opportunities is not limited to foreign investors; many domestic companies are also seeking opportunities to establish land funds for project development. Representatives from IDICO mentioned focusing on renewing industrial parks in Thai Binh, Hai Phong, and promoting projects in Dung Quat (Quang Ngai).
Mr. Dinh Thanh Phuong, Business Development Director at Vietnam Industrial Park, emphasizes that M&A of projects is always a target, driven by the desire to diversify products and services and expand project scale. Vietnam Industrial Park also aims to execute M&A for developing from scratch or buying existing factories and warehouses for renovation and lease.
One of the reasons for demand outstripping supply is that the current supply of land for lease in industrial parks does not meet investor requirements regarding location, area, infrastructure, and lease term.
To make these “attractive pieces” less challenging, experts suggest that domestic industrial developers need to thoroughly prepare resources, ranging from products, services, to human resources. Additionally, timely policy transformation and readiness of local ministries and departments are crucial. Large investment projects that bring economic benefits and ensure environmental, social, and governance factors should be encouraged with “red carpet” investment incentives.