Lotte's Success Story in Vietnamese Real Estate

INVESTING IN REAL ESTATE IN THE CURRENT CONTEXT: LESSONS FROM LOTTE'S SUCCESS STORY

FROM RETAIL TO REAL ESTATE: LOTTE'S STRATEGIC APPROACH
With extensive experience in manufacturing and retail markets in Japan and South Korea, the Lotte Group generated substantial surplus capital before venturing into real estate. This successful business model was later replicated in Vietnam.

Lotte entered the Vietnamese market in the late 1990s, initially focusing on the fast food sector through its Lotteria chain. Approximately a decade later, the group expanded into retail with Lotte Mart. Today, Lotteria leads the fast food market with over 200 outlets, while Lotte Mart operates more than 80 shopping centers across the country.

These thriving retail chains served as massive cash generating engines, enabling Lotte to diversify into real estate. The group acquired high profile properties such as the Legend Hotel Saigon and Diamond Plaza, and developed landmark projects like Lotte Center Hanoi.

Lotte registered its investment in a high end urban area in Thu Thiem as early as 2017 but only broke ground on the project on September 2, 2022. The Lotte Legend Hotel, in particular, attracts a large number of guests and serves as a premier venue for major conferences.

BUILDING CASH FLOW THROUGH RETAIL NETWORKS
Domestic enterprises can learn from the strategies of Japanese and South Korean conglomerates, which leverage retail networks to generate steady cash flow before expanding into real estate or consumer finance. For instance, Japan’s AEON Group in Vietnam has focused on consumer finance through its installment payment service, ACS. Meanwhile, Seven Eleven, the world’s largest convenience store chain, established Seven Bank to provide financial services, with ATMs conveniently located in its stores.

WAITING FOR THE RIGHT MOMENT TO INVEST
Real estate projects tend to succeed when infrastructure is well developed and local income levels are stable. Lotte’s Eco Smart City project in Thu Thiem’s Functional Area 2a, signed in July 2017 and officially launched on September 2, 2022, exemplifies this approach. By the time construction began, key infrastructure, including Thu Thiem 2 Bridge and major roads, had been completed.

Similarly, in Vi Thanh City, Hau Giang Province, DIC Group spent nearly a decade preparing before breaking ground on the five star DIC STAR Hotel in July 2022. These cases highlight how seasoned real estate developers carefully choose the optimal time to launch projects, avoiding premature investments that could lead to slow sales due to limited local purchasing power.

ADAPTING TO CURRENT MARKET CONDITIONS
With real estate credit growth stagnating and major developers like FLC facing financial distress, the industry is shifting its focus. Instead of targeting investment driven segments like condotels, businesses are now prioritizing direct housing demand for end users.

Diversifying funding sources beyond bank loans is also crucial. Retail based financing models, similar to those used by Japanese and South Korean firms, could provide a viable alternative.

Additionally, the post pandemic downturn in tourism has dampened growth in coastal real estate investments. Developers may need to adjust their strategies by targeting middle income and affordable housing segments, which have recently attracted interest from Malaysian, South Korean, and Japanese investors.