Vietnamese companies are increasingly moving from their traditional business platforms into real estate speculation and development in a bid to boost corporate values on the stock market.
High-profile firms like REE are widening their portfolios to include real estate speculation and property development
The shift has become order of the day for many firms eager to tap into a red hot real estate market that is generating huge profits for investors as demand currently heavily outweighs supply.
Refrigeration and Engineering Corporation (REE) is one company known for its mechanical and engineering business. The firm is now a high-profile real estate developer with five successful office projects in Ho Chi Minh City on the books and more on the way.
Last year, REE pocketed over $3 million from the lease of company-owned office space and expects to double that figure this year after opening a further 27,000 square metres in area two months ago.
REE has plans to increase its forays into the market with a $25 million investment that will see the company increase its leased floor space by an additional 65,000sqm.
Confectionery maker Kinh Do Corporation recently announced that it would invest 30% of its operating profits into property development with an office and residential complex for Ho Chi Minh City.
Battery producer Pinaco and the Saigon Garment Company (SGC) are other cases in point. Pinaco is preparing a share issuance to raise capital to build a new factory in Dong Nai province and is looking for partners to develop its current 20,000sqm site in Ho Chi Minh City's District 6. SGC also plans to build a small industrial complex and move its facilities out of town. The company will rebuild residential and office blocks on its current site.
Other firms, which are preparing for initial public offerings (IPO), are also building large offices to boost corporate values. Vietcombank is due for an IPO in October and has stated it will put up a 77,000sqm office block in the country's second city, while Bank for Investment and Development of Vietnam, Electricity of Vietnam, Bao Viet and Bao Minh are all building their own office buildings.
Real estate investments are not only boosting corporate profiles but are also bringing in tidy profits for companies not afraid to step away from their traditional business models. Grade A office monthly rental rates in Hanoi and Ho Chi Minh City now reach $38 per square metre and are expected to fetch up to $46 by next year. Housing and retail space demand is also strong with rents set to increase across the board.
Source: VNE
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