The Four Real Estate Segments that Weather the Storm and Why

Savills predicts that while domestic spending may slow down in 2024, the retail real estate market will remain robust due to limited space availability. This poses a challenge for retailers looking to expand, potentially driving up rental prices in central areas. Neil MacGregor, CEO of Savills Vietnam, emphasizes the importance of infrastructure development, which aligns with the government’s focus.

New residential projects have launched, mostly in peripheral areas experiencing rapid economic growth driven by manufacturing. Foreign direct investment (FDI) remains crucial for the real estate market across all sectors, especially industry. According to Savills’ data, Vietnam offers 33,000 ha of industrial land for lease, with an impressive 80% occupancy rate, particularly in the southern region. Ready-built warehouses and factories are an emerging trend, attracting significant investor interest and maintaining high occupancy rates nationwide.

Average rental rates have reached 5.4 USD/m2/month, predominantly in the southern market. However, the northern region, including provinces surrounding Hanoi like Bac Giang and Hai Duong, is rapidly catching up.

The retail market is bolstered by favorable demographics, including a growing middle class. Large-scale shopping malls in suburban areas have opened their doors and are attracting significant consumer footfall.

The office market has witnessed strong demand, fueled by a stable economy and expanding businesses. Savills experts predict stable rental rates in the future due to new supply and a focus on sustainability.

Additionally, a recent study by Savills Impacts confirms that Ho Chi Minh City and Hanoi are among the fastest-growing cities globally, attributed to factors such as demographics, urbanization, economic growth, and a burgeoning middle class. Remittances to Ho Chi Minh City alone have reached a record high for the past decade, with an estimated 20% invested in real estate, further supporting the residential market’s recovery.

The economy also benefits from FDI. According to the General Statistics Office, in the first six months of the year, realized FDI in Vietnam was estimated at 10.84 billion USD, an increase of 8.2% compared to the same period last year. This is the highest FDI performance for the first half of the year in the last five years.

Analyzing Vietnam’s economic landscape, Jack Nguyen, CEO of InCorp Vietnam, noted that FDI primarily targets manufacturing industries, real estate, and energy. Singapore, Japan, and Hong Kong remain the largest investors. “Vietnam is becoming an attractive destination for Chinese businesses looking to diversify their supply chains, with numerous new industrial parks in development,” said Jack. “We receive consulting requests from Chinese companies, especially in the northern region. Many Chinese manufacturers are relocating to Vietnam to establish their supply chains. The trend of building large-scale industrial parks on the outskirts of cities promises to create a new wave of investment.”

Michael Kokalari, Chief Economist at VinaCapital, shared his insights at the event, stating that Vietnam is gradually moving up the global value chain. Currently, Vietnam imports complex industrial parts and utilizes low-cost labor for final assembly. However, with the influx of FDI, the country is acquiring the techniques to produce more complex products, capturing more value for the domestic economy. This development path mirrors the successful East Asian model pursued by countries like Japan and South Korea.