Increased foreign investment from trade deal to benefit real estate-related sectors.
Despite the impact of the TPP on the local real estate market not being to the degree expected on industries such as garments and textiles, fisheries, and agriculture products, real estate-related sectors like industrial parks, warehouses, and logistics may see a certain boost in demand resulting from increasing foreign investment, according to a CBRE report released on October 22.
Demand for office space and accommodation is also expected to rise to meet the space requirements of foreign companies and expats, according to Mr. Mr. Marc Townsend, Managing Director of CBRE Vietnam. “Signing an agreement that requires stringent discipline is definitely not an easy job for Vietnam, especially for its weak areas like labor and government procurement,” he said. “Vietnam must be able to maintain a stable macro-economic environment that permits adjustment and encourages long-term investments.”
Regardless of the long term impact of the TPP, real estate stakeholders still have a very positive attitude towards the deal.
In terms of industrial land and warehouses, the TPP will spur more investment into Vietnam, especially from countries that are major importers of Vietnamese products, like the US and Japan. US investment in Vietnam remains modest compared to South Korea and Japan.
“American companies will increase their manufacturing activities in Vietnam and re-import Made-in-Vietnam products thanks to the country’s tax exemptions on major products such as garments and textiles,” the report stated.
They will likely target industrial land in the southern provinces, where a number of existing garment and textile factories are located. Similarly, manufacturers from other countries will certainly consider switching from non-TPP countries like China, Thailand, Cambodia, Indonesia, and India to Vietnam to enjoy extra-low tariffs.
This will lead to more demand for industrial land, warehouses and factories, not just from TPP countries but also from non-TPP countries like China, Hong Kong and Taiwan, who want to front-run the agreement.
In this context, industrial park developers and construction companies will benefit the most when a great number of textile or fisheries companies migrate to Vietnam.
In logistics, increasing trade flows will result in higher demand for logistics services. There will be greater need for infrastructure, including roads, railways, seaports, and airports to facilitate the sector.
With office space and accommodation, increasing foreign investment and growing demand for foreign companies to set up in Vietnam will drive up demand for international-standard office space. Given the limited supply of high quality space in both Hanoi and Ho Chi Minh City, future office developers might want to review their development plans to speed up the office development process.
The anticipated growth of foreign companies coming to Vietnam also means higher demand for serviced apartments, apartments for lease, and even apartments for sale.
Under the new Law on Housing, which has permitted foreigners to buy homes in Vietnam since July 1, 2015, more foreign buyers will be encouraged to own an apartment instead of leasing, especially given the housing price in Vietnam is considerably lower than in other regional countries.
Regarding land prices, although it might be too early to discuss the possibility of an increase, growing demand for industrial land and limited supply of quality land are the two factors that will drive the price, especially in areas most sought after by textile and garment manufacturers, like Binh Duong, Dong Nai., and Long An.
The great thing about the TPP is it moves the reputation of Vietnam upwards, according to the report. There is going to be a greater need for the development of industrial parks, commercial and residential projects, and the country’s infrastructure, to build better roads, better ports, and better connecting services.
There are going to be a lot more activities for developers across these fields and they should prepare well in advance in terms of workforce, technical transfer and training, productivity, and compliance, to front-run these golden opportunities, the report stated.
The development of the TPP is undoubtedly a valuable boost for Vietnam’s export-focused economy, it said in conclusion. The next couple years will definitely be very exciting for Vietnam if the pact is passed by other member countries.