How is Vietnam’s Office Real Estate Market Positioned?
Vietnam’s office market is a thriving real estate market, with both domestic and foreign brands offering office spaces in categories like Grade A, Grade B and Grace C. Boasting an average occupancy rate of ~%, Vietnams shows strong potential in terms of demand and increasing Rental Rates reflect that Landlords are also benefitting in the market. Vietnam’s GDP in 2018 amounted to USD ~ billion and GDP per capita amounted to USD ~, in 2018, indicating greater ability to own and rent Luxury and Grade A office properties. These factors point towards the scope and profitability of the office market in Vietnam.
Vietnam’s office real estate market has been growing at a CAGR of ~% which indicates the market still has room to grow. Rental rates witnessed some fluctuation but started increasing again by 2018. As market trends like the emergence of Co-Working and rising number of business migrating from China to Vietnam continue, the Office real estate market in Vietnam is expected to grow strongly.
Key Trends in the Office Real Estate Sector in Vietnam
Decentralization among Tenants: Decentralization is a trend noticeable among the major cities of Vietnam, namely, HCMC and Hanoi. In both cities, tenants are moving from the older CBD (Central Business Districts) to newer business areas – Midtown and the West in Hanoi, where has the largest future supply. Another reason for this shift is the availability of larger and more affordable spaces in the Non-CBD Area.
Co-Working Spaces Gaining Traction:- Co-working spaces are gaining traction since traditional office spaces are limited. Co-working space providers have rented ~ SQM in some of HCMC’s newest office buildings. The demand for co-working space keeps increasing since grade A office supply continues to be limited, and businesses struggle to find large space.
Landlord Dominant Scenario:- The Vietnamese office market showcases dominance of Landlords in terms of the rent charged for leased office spaces. Supply of office spaces in popular business districts in HCMC and Hanoi are limited, so a trend of inflated rent in these areas has been observed. Companies have to accept the hike or relocate.
Current Office Demand and Supply
Market supply in Vietnam took a major slowdown in 2015, due to shortage of supply in Hanoi, 2015 onwards. That slowdown can be attributed to projects not getting approvals for construction. Even still market supply has been steadily increasing due to HCMC’s contribution to the supply.
Vietnam’s Office real estate’s demand witnessed a steady increase due to the increasing number of business starting operations in Vietnam, however growth rates witnessed steady decline due to rising rental rates, across the country’s business centric states.
How is Vietnam’s Residential Real Estate MARKET Positioned?
Vietnam’s Residential Real Estate market has been under the eye of investors since 2015, when the Real Estate Housing law was enacted. Ever since foreign investors have been flocking to Vietnam, be it Chinese or Korean investors, looking to invest in Residential Real Estate in hope of stronger returns over the years. Vietnam’s Residential market has been growing at the rate of ~ % from 2013-2018 when the market showcased signs of recovery. With rising population and increased investments within the market, Vietnam Residential Market is expected to become a hotspot among the Asia-Pacific countries
Vietnam’s residential real estate market is divided into three further categories namely: Apartments, Residential and Villas & Townhouses. Each of these categories have showcased strong CAGRs over 2013-2018, among which Villas showcased the highest growth, followed by Apartments and Townhouses. Proptech and the flexible millennial lifestyle are some trends that will affect the market in the coming future.
Key Trends in the Office Real Estate Sector in Vietnam
Transportation and utility infrastructure Improving: Vietnam has been investing to improve public utilities and infrastructure. Vietnam now has over 2000 Km of highways. Ho Chi Minh City is planning to launch a city wide metro network which will help travel between the CBD and other areas of the city. Various expressway projects are being planned or under construction to improve connectivity within major cities. Steps like these raise the moral of speculators and Investors who will start to invest in Vietnam Residential Market.
Young Homeowners: Population Rising: As of 2018, Vietnam has a population of over ~ Million people, a statistic which has grown at a CAGR of ~ % 2013-2018.
Among this population the number of working professional in the age group of 25-40 has increased at a CAGR of ~ %, People who are most likely to be the new sources of demand for the market
How is Vietnam’s Hotel Real Estate MARKET Positioned?
Vietnam has become a tourist hotspot in recent years, with the number of international tourists growing at a rate of ~% from 2013-2018. With Business destinations such as Ho Chi Minh City and Hanoi and upcoming Tourist Destinations like Da Nang, Vietnam’s Hotel industry is sure to witness a boom in demand. The market is not only driven by foreign tourism but also by domestic travel. Both local and foreign tourism drive the demand for hotel rooms upward. As the disposable income continues to increase, domestic travelers seek better and more luxurious hotels. Additionally, foreign visitors, might be price sensitive, but still seek higher-end hotels when visiting Vietnam, whether for leisure or meeting-incentives-conference-exhibition (MICE) purposes.
Cities such as Da Nang and Hoi Phong, will serve as the next hubs for the tourism industry, so global brands will try to increase the presence in these cities to gain the early advantage, making the hotel market tin Vietnam highly competitive.
Key Trends in the Hotel Real Estate Sector in Vietnam
Rising number of Domestic Tourists: Vietnam has witnessed a rising influx of Domestic tourists as disposable income per individual increases. Vietnam recorded the presence of ~ million domestic tourists in 2018, while Ho Chi Minh City and Hanoi witnessed ~ million and ~ million domestic tourists in 2018. Vietnam is expected to increase this number to ~ million by 2025 which is a positive indicator for the industry.
Influx of Foreign Brands within Vietnam: Vietnam’s potential as a tourist hotspot has become clear to global hotel brands as is evident from the increase in number of branded operators from ~ in 2010 to ~ in 2018. Vietnam is putting in efforts to improve public infrastructure and tourism services, this makes hotel brands willing to invest in Vietnam.
Rising number of foreign tourists: Foreign Tourists in Vietnam have been increasing over the years. With ~ million foreign tourists in 2013, the number has grown to ~ million foreign tourists by 2018 at a CAGR of ~ %. This number is expected to rise to ~ billion by 2025. This showcases the strong demand pool for Hotels in Vietnam’s Hotel Market.
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