Non-traditional real estate receives much attention from Asian investors

Data center real estate remains in demand

A recent report from Savills Prospects shows that, although the real estate transaction volume in Asia Pacific fell by 42% to US$62 billion in the first half of 2023, niche segments in the region continued to attract more than US$8 billion in investment capital, higher than the peak in 2022. The niche segments identified include data center real estate, logistics and life sciences .

Mr. Simon Smith, Director of Research & Consulting, Savills Asia Pacific, commented that there are many reasons attracting investors to consider investing in sub-segments in the Asia-Pacific market.

First, sectors such as data centers and life sciences are big global trends and are expected to continue to grow despite the global real estate downturn.

Non-traditional real estate receives much attention from Asian investors, image 1 — Real estate for building data centers is of interest to many foreign investors.

These segments are considered to have more revenue generating opportunities than traditional leasing. At the same time, these sectors are in the early stages of development in many Asia-Pacific countries, which means that investors now have the opportunity to seize the leading advantage.

Savills Prospects also pointed out that the number of data center transactions in the first half of 2023 reached a level almost equal to that of 2022. Meanwhile, the number of data center constructions simultaneously recorded a high level in the past two years.

Savills experts analyzed: “Content platforms, cloud data and the development of AI are creating huge amounts of data that need to be stored securely. The demand for data centers from “giants” such as Microsoft and Amazon as well as domestic enterprises will become very large in the next few years; thereby, attracting more investment for this type of real estate”.

Meanwhile, office transactions in Asia fell 56% in the second quarter of this year, while retail transactions fell 49% year-on-year. Industrial real estate in general also recorded a 14% drop in investment transactions. However, total investment in the industrial real estate market is still higher than pre-pandemic levels.

Non-traditional real estate receives much attention from Asian investors, image 2 — Total investment in the industrial real estate market in Asia remains high.

Commenting on the investment potential in the Asian market in general, Mr. Smith emphasized: “Asia still has many positive signals for the office market, when the demand for office work has recorded a significant increase because the working culture still prioritizes direct exchange activities in many countries. In addition, the demand for retail is also increasing as online stores are also transforming into experience locations instead of serving the usual sales purpose. Moreover, the market still needs more supply of logistics and modern industrial real estate to meet the growing demand.”

Vietnam remains an attractive investment destination

According to Savills Prospects research, Japanese investors were the most active in the first half of 2023 with $2.5 billion in new investment – higher than their previous record in 2018 ($1.4 billion). The markets targeted by Japanese investors are Southeast Asian countries and Australia.

According to a report from the Foreign Investment Agency - Ministry of Planning and Investment, as of August 20, 2023, Japan is the third largest investment partner in Vietnam, accounting for 14.2% of total foreign investment capital and increasing by 73.1% over the same period in 2022.

In Vietnam, this report also shows that in the first 8 months of 2023, total foreign investment capital in the Vietnamese market achieved impressive results, with the total newly registered capital, adjusted capital and capital contribution to buy shares and purchase capital contributions of foreign investors in Vietnam reaching nearly 18.15 billion USD, an increase of 8.2% over the same period in 2022.

Of the total FDI capital in Vietnam in the first 8 months of 2023, 1,924 projects were granted investment registration certificates with newly registered capital reaching more than 8.8 billion USD, an increase of 69.5% in the number of projects and 39.7% in capital over the same period. Accordingly, the processing and manufacturing industry took the lead with a total investment capital of nearly 13 billion USD, accounting for nearly 67.8% of the total newly registered investment capital, an increase of 14.7% over the same period.

Commenting on the upcoming market trends, Mr. Matthew Powell, Director of Savills Hanoi, said: “FDI capital flows are showing many opportunities as newly registered projects increase sharply, especially in the manufacturing sector. Vietnam is making great efforts to improve infrastructure through the completion of inter-provincial highways, along with the construction of new and upgraded international airports and deep-water seaports. The development of infrastructure, along with many preferential investment policies and administrative procedure reforms, has created investment attraction for the market.”

Non-traditional real estate receives much attention from Asian investors, picture 3 — Mr. Matthew Powell, Director of Savills Hanoi.

In addition, green real estate segments in Vietnam are also of interest to investors, as ESG commitments and green factors in real estate have become an important requirement. Especially for foreign enterprises that have committed to reducing net emissions to zero by 2030, they always need to choose a greener option for real estate, leading to increased demand for green real estate products. This requires investors in Vietnam to keep up with the market, bringing more real estate products that meet green and ESG criteria.

“The greening trend has been recognized for office, retail, residential products and now it has reached industrial real estate products. A number of international and Vietnamese investors are planning to invest in high-tech solutions for industrial real estate to attract more demand for green factories and high-value-added industries such as electronics, electrical equipment, semiconductors. This will also have a positive impact on the market, helping the market develop in a greener and more sustainable direction,” said the Director of Savills Hanoi.

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