Vietnam’s Real Estate Market Sees Surge in M&A Activity Amid Policy Shifts and Restructuring
Vietnam’s real estate market is experiencing a significant surge in mergers and acquisitions (M&A), driven by a combination of factors including the resolution of legal bottlenecks, increased clarity in planning, and the need for corporate restructuring. This has created a dynamic environment for both domestic and foreign investors.
Favourable Policy Changes Fuel Growth
According to Trang Le, country head at JLL Vietnam, the real estate market is benefiting from the resolution of previous administrative barriers and greater clarity in planning. This has paved the way for increased supply and greater collaboration between industry players. These policy adjustments have created a more conducive environment for investment and development, attracting both local and international interest.
M&A as a Strategic Solution
Amidst tight financial conditions, many businesses are turning to M&A strategies as a key solution to maintain growth momentum. Corporations, after undergoing restructuring, are actively expanding their real estate portfolios through these strategic alliances. Prominent domestic companies such as Novaland Group and Phat Dat Group are actively participating in the M&A market, seeking opportunities to consolidate their positions and expand their operations.
FDI Inflows Remain Strong
The real estate sector has attracted substantial foreign direct investment (FDI), absorbing $2.75 billion, which accounts for nearly one-fifth of the total FDI capital in Vietnam. Actual disbursements have reached $1.5 billion in the past 10 months, highlighting the continued confidence of foreign investors in the Vietnamese real estate market. Investment capital is primarily directed towards projects with high legal transparency, specifically commercial land funds with approved planning, clear land use rights documentation, and a well-defined construction completion roadmap.
Investor Stratification
The market exhibits a clear distinction between investor groups. Local investors are more active in smaller to medium-sized deals, while foreign partners are focused on large-scale transactions. These larger deals typically involve high-end residential segments, integrated urban developments, and strategic industrial real estate. This difference in investment scale reflects varying risk appetites and investment strategies.
Residential Sector Dominates M&A Activity
JLL’s observations of publicly available M&A deals in the first 11 months reveal a cumulative transaction volume of approximately $2.4 billion. However, when including unannounced transactions observed and recorded by JLL, the estimated transaction volume is significantly higher. The residential real estate sector leads the way, accounting for over 70 per cent of the total M&A transaction volume. This dominance highlights the strong demand for housing in Vietnam, driven by urbanization and a growing middle class.
Other segments, such as commercial and resort real estate, account for approximately 17.7 per cent and 5.3 per cent, respectively. The data centre sector has also emerged as a potential niche market, representing 3.3 per cent of M&A transaction volume, reflecting the growing demand for digital infrastructure.
Land Banking Trend
The significant gap between supply and demand reflects the strong demand for land from investors. This trend of land banking is particularly important due to the increasing scarcity of clean land and stricter legal procedures aimed at enhancing transparency. Securing land early allows developers to capitalize on future growth opportunities.
Policy Shift Opens New Avenues
The policy allowing agreements on non-residential land use rights for commercial housing development from April 2025 has opened up significant opportunities for converting industrial and agricultural land. This is expected to strongly promote M&A deals in the housing segment, which is currently experiencing a prolonged supply shortage and high absorption rates. This policy change is a game-changer, unlocking vast potential for residential development.
Segment-Specific Dynamics
The office segment shows a clear differentiation between Ho Chi Minh City and Hanoi. Ho Chi Minh City is facing a severe supply shortage, resulting in high occupancy rates and strong rental growth. Hanoi, on the other hand, is experiencing a strong wave of foreign investment from international investors.
For the hotel sector, the expected investment yield is estimated at 8-9 per cent this year, with total M&A transaction volume estimated at $125 million. The tourism sector’s recovery is driving demand for hotel assets.
Industrial and logistics real estate continues to attract considerable attention. The cumulative M&A transaction volume of the industrial real estate segment in the first 11 months of the year reached approximately $74 million. Instead of solely leasing land for self-construction, investors are increasingly favouring the acquisition of existing industrial parks with established infrastructure, enabling expansion in new phases. This approach saves implementation time, ensures infrastructure quality, and minimizes legal risks.
The emergence of diverse investment products, such as industrial land funds, ready-built factories, and specialised segments like cold storage and data centres, is creating abundant M&A opportunities in the industrial sector.
Key Drivers of M&A Activity
Several factors are driving the surge in M&A activity in Vietnam’s real estate market:
- Legal Policy Reforms: Legal policy reforms, particularly those allowing investors to flexibly convert non-agricultural land into commercial housing projects, are a decisive factor.
- Corporate Restructuring: The need for corporate restructuring plays a crucial role. Many domestic companies face liquidity challenges and accumulate bad debts from the rapid growth phase of 2020-2022, forcing them to seek M&A solutions to reorganize their finances and ensure project legal compliance.
- Stable Monetary Policy: A stable monetary policy with an average lending rate of 7-9 per cent, lower than in recent years, has created a favourable environment for capital access. This preferential interest rate not only helps balance competitiveness between domestic and international investors but also encourages long-term capital inflows into the market.
JLL’s Recommendations for Success
JLL recommends that Vietnamese businesses focus on improving four key factors to ensure success in M&A deals:
- Legal Compliance: Ensure the complete legal compliance of the asset, particularly land use rights documents and related permits.
- Professional Valuations: Conduct professional valuations according to international standards and update them regularly to reflect market conditions accurately.
- Transaction Flexibility: Maintain flexibility in the transaction structure, as businesses need to be ready to consider various forms of cooperation to attract potential investors.
- Transparent Financial System: Build a transparent financial system with internationally audited reports and clear corporate governance to instill confidence in investors.
Companies should invest in standardising their financial reporting systems and establishing rigorous internal governance processes to enhance their attractiveness to potential partners and ensure successful M&A outcomes.