Vietnam may have once been famous for war, but now the southeast Asian powerhouse means business, and Singapore’s CapitaLand is betting that those businesses will need offices.
After investing in residential and serviced apartment projects in Vietnam since 1994, Singapore’s biggest developer announced plans this week for a $500 million real estate fund targetting commercial assets in its southeast Asian neighbor. In a presentation to investors, CapitaLand asserted that Ho Chi Minh City’s office market in particular is “at the start of a growth phase.”
The fund will focus on securing commercial properties in Ho Chi Minh City and Hanoi, hoping to take advantage of the current mismatch between demand and supply of Grade A offices.
“We see opportunities in the commercial space in Vietnam so we are prepared to take a position,” CapitaLand President and Group Chief Executive Lim Ming Yan said in the presentation. “I think the general trajectory for Vietnam is favorable and we foresee that this trend will continue for at least the next 10 years.”
When the fund launches, it will be CapitaLand’s second investment fund in the country. The firm launched a $200 million fund with GIC and Mitsubishi Estate Asia as capital partners in 2010. The fund was fully invested into the development of three residential projects.
Is CapitaLand Ahead Of The Curve When It Comes To Vietnam?
While many investors do not rate Vietnam, it looks as if CapitaLand may be on to something. Ho Chi Minh City was ranked as having the fourth best investment prospects in Asia, according to the Emerging Trends in Real Estate® Asia Pacific 2017 report jointly published by the Urban Land Institute and PwC.
The report noted that the country has become the most popular real estate investment destination in Southeast Asia with the commercial market in the city becoming increasingly interesting to investors. There is also an overall shortage of office supply in Ho Chi Minh City and this is something that could take years to sort.
Singapore Firms Pour Money Into Vietnamese Projects
In addition to launching the new commercial-focused real estate fund, CapitaLand also announced that it is looking to purchase more residential sites near metro lines. At the moment, the firm has launched or completed nine residential projects in Ho Chi Minh City and Hanoi.
In September, the developer bought a site in District 1 of Ho Chi Minh City for $51.9 million. It plans to build a 17-storey residential tower and a 22-storey serviced residence tower on the site.
Keppel Land is another Singapore-based developer active in Vietnam with 20 projects spread throughout Hanoi, Ho Chi Minh City, Dong Nai and Vung Tau. In August, the firm opened its Saigon Centre retail center in Ho Chi Minh City. Earlier in the year, Keppel Land announced it had acquired Gaw Capital’s stake in a $93.9 million mixed-use development in Ho Chi Minh City’s Thu Thiem New Urban Area.