Viet Nam has a strong regional standing and is increasingly offering occupiers reputable and high-end commercial and industrial real estate. The country’s solid economic performance and trajectory create an optimistic outlook and attract foreign companies looking to capitalise on this vibrant market.  

Savills Viet Nam collaborated with developers and real estate playerssuch as Taisei Ha Noi, Capital Place – Twin-Peaks Joint Stock Company, 36 Cat Linh – Thanh Hoa Construction Corporation, YSL Group, Frasers Property and Logos Property. The event highlighted the latest performance metric, new development trends, advantages and challenges for occupiers, and addressed common concerns occupiers face.  

Promising Outlook for Grade AOffice Supply Despite Changing Regulations 

Demand for green and sustainable offices is on the rise, with occupiers prioritising new buildings that deliver green credentials and healthy spaces, and foster connectivity and interaction. Hoang Nguyet Minh, Senior Director, Commercial Leasing, Savills Ha Noi shared: “The shift in tenant demand has boosted competition, which has pressured rent in older buildings that do not meet environmental criteria. Green certifications for office buildings have almost become a necessity. Therefore, developers must have investment or renovation strategies to remain competitive. Occupiers must prepare carefully to find spaces that align with their ESG commitments”.   

According to Savills latest SPPI report, Ha Noi and Ho Chi Minh City office markets are competitive in the region. Grade A office rent is significantly lower than regional peers, which gives these markets a competitive advantage. Grade A office rent in Ho Chi Minh City averages US$62/sq m and US$41/sq m in Ha Noi. Meanwhile, in Seoul, rent is recorded at US$96,3/sq m, US$100,5/sq m in Singapore, and US$208,6/sq m in Hong Kong.  

Revised fire regulations are restricting occupiers from signing new leases. This makes the lease process even longer than before, which could put pressure on cash flows and budgets. Given the new regulations, buildings requiring approval are at record highs, however, the approval process is slow given that three different documents on the requirements have been issued in 18 months. 

These policies have driven up the costs for businesses looking to relocate, establish themselves, or expand. Occupiers can only move in after the property receives its fire safety approvals, however, occupiers could already be paying for a space they cannot occupy. Therefore, the longer the fire safety approval process, the higher the costs businesses must carry before officially moving in.   

Minh shared that Ha Noi is set to welcome key projects soon, including Capital Place, 36 Cat Linh and Taisei Hanoi Office Tower. “Tenants will have diverse options to pick from. Events like these allow us to share market insights with corporate occupiers, which is useful if they are looking for a new office or support during the lease process.” 

Occupiers must carefully consider and plan early for office changes, prioritising project quality and the developer'sreputation. With careful preparation, tenants can avoid unnecessary costs, manage risks, and will more likely find their ideal office. Developers should also utilise a professional unit early to ensure they meet tenant demands.  

How Labour and Infrastructure Influence Industrial Real Estate 

As Viet Nam is emerging as a manufacturing hub, industrial real estate is in high demand with local and foreign players. Viet Nam has 563 planned industrial parks(including industrial zones in coastal economic zones and border gate economic zones) spanning 210.9 thousand hectares. Of the 563 planned industrial parks, 406 have beenestablished. Read more about this in Industrial Insider.  

Thomas Rooney, Senior Manager of Industrial Services at Savills HaNoi, said: "Viet Nam'seconomic risk index is lower than other emerging markets such as Myanmar, Bangladesh, Laos, Cambodia, or Malaysia. In addition, Viet Nam continues to benefit from foreign investment, has advantages in laboursupply, and has great opportunities for exporting to the Chinese market. Viet Nam also has solid domestic consumption, which supports the demand for goods. “ 

While Viet Nam has a large labourforce, there is a lack of skilled labour. To maintainits attractiveness, the Government must prioritise tertiary education and training so that the quality and quantity of skilled labour does not differ from regional peers.Viet Nam has outlined its socioeconomic development strategy from 2021 to 203, which includes plans to reform education and improve the quality and access to training, however, these are long-term structural changes that cannot happen overnight.  

Infrastructure development underpins industrial development, in early January 2023, 12 components of the North-South Expressway were launched. The project will have a total length of 729km, passing through 15 provinces and cities with a total investment of VND 147 trillion. It will be a driving force for development, connecting provinces and opening space for socioeconomic development. Viet Nam has a considerable infrastructure budget compared to Southeast Asian countries; however, improvements are required.  

"Viet Nammust focus on applying science and technology to improve the quality of human resources to boost productivity and economic growth. The Vietnamese Government is also making efforts to reform the education system to enhance labour skills to meet market demands. Improving infrastructure is also mandatory to attract investment," Thomas commented.  

Conclusion 

If you are interested in the commercial and industrial market or need a space to expand your business or manufacturing premises, contact Savills Commercial Leasing or Savills Industrial Services.  

The team offers comprehensive consultancy services backed by a detailed understanding of the commercial and industrial landscape. Contact Hoang Nguyet Minh (commercial) or Thomas Rooney (industrial) for more information.