As Vietnam strides confidently into 2024, its economic landscape gleams with promise and opportunity. A pivotal player in Southeast Asia’s burgeoning market, Vietnam’s dynamism is underscored by strategic government initiatives, innovative advancements, and steadfast economic reforms. Within this landscape, the real estate sector stands as a key barometer of the nation’s growth trajectory. In this article, we explore into the multifaceted world of Vietnam real estate, looking at developing trends, prospects, and the critical role it plays in creating the country’s economic story.

Look back to 2023:

In 2023, Vietnam’s economy displayed a clear shift towards a service-based model. The service sector emerged as the strongest contributor to GDP, accounting for a significant 42.5%. This sector also boasted the most impressive growth rate at 6.8%, highlighting its dynamism.

In comparison, the industrial and construction sector, traditionally a major force, held a 37.1% share of GDP. However, its growth of 3.7% suggests it may be facing challenges in the current global economic climate. Agriculture, a mainstay of the Vietnamese economy for many years, contributed 12% to GDP.

2024 – A Dynamic Market Poised for Growth

Vietnam’s economy has been on a significant growth trajectory, driven by the government’s strategic plan, commitment to innovation and ongoing economic reforms. GDP is predicted to reach a staggering $469.67 billion, with forecasts exceeding 6% by both the Asian Development Bank (ADB) and Fitch Ratings.

Early in 2024, Vietnam sees a spike in foreign investment, as seen by a noteworthy 38% year-over-year rise in Foreign Direct Investment (FDI), highlighting the country’s growing allure to international investors, supported by its advantageous position and stable political climate. Meanwhile, a solid basis for future economic growth is laid by the government’s unwavering commitment to infrastructure development, which consistently sees spending at 6% of GDP. In addition, the manufacturing industry expects a rebound, with estimated production growth reaching 8%, making Vietnam a more appealing location for companies looking for a thriving and growing manufacturing cluster.

Alternative sectors like co-working and co-living spaces, data centers, and senior centers are also gaining traction. The concept of co-living is rapidly gaining popularity, especially in Vietnam, where the government is expanding its visa policies and exemptions. Vietnam is making strides in its digital infrastructure investment, with its cloud and data center industry ranking among the fastest-growing globally.

With that conditions, what significant changes are happening in the real estate sector in Vietnam?

– The office market in Ho Chi Minh City witnessed a substantial expansion with the introduction of seven new projects, contributing over 156,000 square meters of office space, reflecting a 10% increase in supply. Despite this surge, robust demand was evident as over 106,000 square meters of space were absorbed, resulting in healthy market absorption. The rising vacancy rates have shifted the market dynamics in favor of tenants, offering them a wider array of options and potentially advantageous lease terms. Additionally, while overall market rents saw an upward trend, nuanced variations were observed, with Grade A rents in prime CBD locations increasing by 5%, contrasting with a marginal decline of 1% for Grade A+ offices. Looking ahead, the pipeline for new projects includes notable developments across various districts. Despite fluctuations in occupancy rates, rental rates for both Grade A and Grade B offices have remained relatively stable, with Grade B offices observing a slight uptick in rents year-over-year.

– In Vietnam’s industrial sector, expansion continues to surge as tenants expand their operations, particularly evident in the Northern Economic Zone where the supply of factories and warehouses is growing significantly, ranging between 16% to 26%. Rental rates in this zone hover between $4.6 to $4.9 per square meter, with occupancy rates exceeding 80% for ready-built warehouses and 90% for ready-to-build factories. Meanwhile, in the Southern Economic Zone, there’s been a notable increase of over 10% in total supply of factories and warehouses, although rental rates remain comparatively lower, ranging from $4.3 to $4.7 per square meter. Despite this, occupancy rates in the Southern zone still maintain robust figures, ranging from 81% to 83%.

– The retail market maintains stability with an impressive occupancy rate of 89.7% and an average rate of $53.1 per square meter. Notably, the market has seen a 1.9 percentage point increase in occupancy compared to the previous year, driven by successful newly completed projects and a wave of renovations in existing ones to enhance competitiveness and consumer experience. Rental prices have surged by 7.6% year-over-year, spurred by adjustments in existing projects and the introduction of new malls like Hung Vuong Plaza and Thiso Mall Truong Chinh – Phan Huy Ich. Looking ahead, several new retail projects are slated for development in 2024-2027, including Park Hills Palace, Vincom Mega Mall Grand Park, Central Premium Plaza, and Parc Mall, collectively adding 95,100 square meters of retail space to the market. This trend is further underscored by the active expansion of international brands such as Uniqlo, Muji, Starbucks, alongside significant strides made by local brands like WinMart and Katinat, highlighting a competitive and dynamic retail landscape in Ho Chi Minh cities.

It’s also worth mentioning that the growing co-working space trend in Vietnam offers promising opportunities, especially for providers like W Business Center or freelancers and professionals. in the creative or IT sector looking for a flexible working environment. While Ho Chi Minh City (HCMC) leads the way in co-working and serviced offices, other cities such as Da Nang are seeing an increase in popularity. Although Ho Chi Minh City remains the top destination for such spaces, serving both domestic and international customers, Hanoi follows closely. The development of the co-working scene in Da Nang is closely watched, depending on factors such as traffic and population movements. Additionally, cost-conscious tenants are increasingly prioritizing affordability when choosing office space, giving businesses the opportunity to negotiate favorable lease terms, especially for office space. Grade A in central business districts (CBD).

Vietnam’s real estate sector is a critical component of the country’s economic story, reflecting both its past achievements and its promising future. As investors and stakeholders navigate this multifaceted world, strategic decisions will continue to shape Vietnam’s growth trajectory. The year 2024 promises to be a dynamic year for businesses like W Business Center and all others, filled with opportunity and growth. As Vietnam strides confidently into the future, the real estate sector will undoubtedly play a crucial role in shaping the nation’s economic landscape.

Sources: W Business Center, NAI Vietnam, JLL, Savills, CW, Dezan Shira and Associates, Acclime, VnEconomy, Vietnam Association of Realtors (VARS), Bloomberg