Unlocking Growth in Vietnam's Real Estate Market

Vietnam’s real estate sector in 2024 exhibited a progressive trajectory, mirroring the nation's robust economic growth of over 7%. A notable highlight was the resurgence of the residential sector, particularly in the North, where condominium supply witnessed a significant rebound. This was accompanied by a sharp appreciation in property values, with Hanoi experiencing a remarkable 26% increase in secondary market prices and a 36% surge in primary market prices. Concurrently, the industrial sector maintained its momentum, driven by a robust appetite for land and ready-built facilities from manufacturing companies. While the office market grappled with elevated vacancy rates, the Ho Chi Minh City (HCMC) Central Business District (CBD) demonstrated resilience with a commendable 3.7% rental growth. The retail sector flourished, propelled by a surge in demand from both domestic and international retailers, notably Chinese brands, resulting in a significant uptick in CBD rental rates. This period also witnessed a pivotal shift in the regulatory landscape with the passage of three landmark laws: the Land Law 2024, the Housing Law 2023, and the Law on Real Estate Business 2023, all effective from August 1, 2024. These legislative frameworks are poised to exert a profound influence on the future trajectory of the Vietnamese real estate market.

Office Demand: A Call to Green-certified Spaces

The Vietnamese office market is witnessing a growing preference for high-quality, green-certified spaces, a trend known as "flight-to-quality." In Hanoi, new office buildings are increasingly incorporating green certifications like LEED, while existing buildings are undergoing renovations to achieve such standards. Simultaneously, there is a strong demand for Grade A and B office spaces. In HCMC, a notable observation is that all new Grade A office buildings have obtained green certifications, showcasing the market's emphasis on sustainability. Similar to Hanoi, HCMC also demonstrates positive net absorption for Grade A and B offices, indicating a strong market for high-quality spaces. This preference for high-end office space is further evident in the expansion of office clusters to the West of West Lake in Hanoi and to the Thu Thiem area in HCMC. While vacancy declined, it remained in the double digits. Hanoi rents stayed stable, while HCMC CBD recorded a 3.7% year-over-year rental growth, driven by new buildings.

Industrial Boom: Strong Infra Leading to Strong Supply for Ready-built Facilities

The industrial market demonstrated a robust performance, attracting continued investment across various sectors. The market experienced stronger merger and acquisition (M&A) activity, diversified funding sources, and expansion of new players. Notably, Chinese manufacturers significantly expanded their presence in the South, while European tenants renewed their activity in the North. Continuous infrastructure improvements facilitated the expansion of the industrial market into new locations, with the Northern region specifically benefiting from a cross-border logistics route between Vietnam and China. Ready-built factories (RBF) achieved the highest net absorption in the past three years, and ready-built warehouses (RBW) in the South saw net absorption double, including absorption from hybrid projects (RBH). Looking at specific regions, North-Tier 1 industrial land comprised 11,430 hectares with 80% occupancy at US$137 per square meter per remaining term. The Central region held 5,090 hectares at 56% occupancy and US$71 per square meter per remaining term. South Tier 1 boasted 26,381 hectares with 89% occupancy and US$175 per square meter per remaining term. This brings the total available industrial land across these key regions to 42,901 hectares. Finally, infrastructure development continued to be a key catalyst, creating new development opportunities. Available land for development has seen substantial growth, increasing 2.8 times from 2.5 million square meters before 2020 to 7.0 million square meters as of Q4 2024.

Retail Expansion: Luxury Retailer Interest, Absorption Rates Increasing

Vietnam's retail market exhibited promising trends in 2024, with HCMC recording its highest net absorption since 2017. Limited prime retail space in CBD areas supported rental growth, while shopping centres evolved into lifestyle destinations. New land acquisition totalled 136,581 sqm in 2024, with over 150,000 sqm of new supply expected in 2025. Occupancy rates improved consistently across Hanoi and HCMC, with HCMC recording outstanding absorption in 2024. Both domestic and international brands expanded, focusing on Food & Beverage (F&B), with F&B accounting for 45% of leasing demand in 2024, followed by Fashion & Accessories at 30%. Amidst economic uncertainty, Vietnam remains attractive to foreign retailers, including Chinese brands and niche luxury brands planning openings in 2025-2026.

Residential Rise: Booming Supply in the North

In the condominium market, Hanoi saw a massive influx of 30,960 units, essentially tripling its annual supply numbers over 2023, while maintaining a healthy absorption rate. While supply remained low in HCMC, absorption rates continued to surge at close to 140%. Primary prices for condominiums saw 36% and 24% y-o-y increases for Hanoi and HCMC respectively. In the landed property market, supply in Hanoi reached 6,324 units, a figure that was more than double of the previous year, chiefly due to the mega-urban properties of Vinhomes Ocean Park 2 and 3. Annual sold units kept pace with this supply boom, at close to 100% absorption rate. In HCMC, supply was 8 times higher than its 2023 figures, at healthy absorption rates. Primary prices for landed property remained stable at 19% and 13% for Hanoi and HCMC respectively.

Overall, the confluence of robust economic indicators, legislative reforms, and evolving consumer preferences suggests that Vietnam's real estate landscape is poised for sustained expansion. The market's inherent resilience, coupled with its increasing appeal to both domestic and international investors, positions it for continued dynamism and potential for long-term value creation. This positive trajectory, fuelled by strategic evolution and investor confidence, underscores Vietnam's emergence as a key player in the regional real estate arena.