|Alex Crane (left), managing director, and Ben Gray, director, at Capital Markets |
What is the reason for Knight Frank return's to the Vietnamese market after years?
Crane: Knight Frank previously had operations in Vietnam, however, the new entity we have established is slightly different from their presence before, which was licensed to another local company. This time, it is a subsidiary of Knight Frank that has a majority interest in the Vietnamese entity.
Knight Frank has been introducing occupiers and investors to Vietnam for a few years, and the country’s prominence on the global stage is driven by promising fundamentals, showcasing the nation as an increasingly important market for our global clients.
How does Knight Frank assess the potential of the Vietnamese market?
Crane: The country is an extremely attractive market, with favourable factors such as a young population, a strategic geographical location, and a consistently remarkable economic growth rate.
The market is also attractive because of its size and value which are both increasing and growing in a more professional direction.
Domestic and foreign investors have been bringing their experiences and global development trends to the Vietnamese market.
One of the areas that saw an increase in professionalism is the manufacturing sector.
When I first came to Vietnam more than ten years ago, I saw the country as one most known for the export of coffee and garments but now, Vietnam is entirely different. The country has shifted to advanced industries such as electric automobiles with VinFast cars and electronic appliances with LG and Samsung. Foreign developers are also increasingly moving their manufacturing network to Vietnam.
The demand for real estate and development also increases, and Vietnam is keeping up with the demand of the global community. That leads to a real improvement in key sectors like logistics, warehouse investment, and infrastructure systems.
Vietnam has approved to reopen international tourism on March 15, how will this affect the real estate market in 2022?
Gray: This decision was greeted positively by the market. Just in the past week, a number of foreign investors have talked with Knight Frank and said they would come to Vietnam to visit project sites. Those investors had all invested in the country previously.
Especially in foreign investment deals worth $100 million or more, investors are eager to see the actual land and interact directly with partners to implement their projects as soon as possible.
There is a lot of interest from investors looking for assets in the hospitality sector and in both office and industrial sectors.
Office occupancy has maintained rates of 90 per cent in the two major cities. The high-end housing market in Vietnam continues to grow strongly as apartment prices in Ho Chi Minh City increased by an average of 19 per cent on-year to $2,800 per square metre.
The development of the logistics industry also led to other industries' development, especially e-commerce. Furthermore, e-commerce entails developing a series of other real estate fields, including warehouses, offices, retail, and residences.
What is your expectation for the property market this year, which segments would perform best?
Crane: The office market has returned to pre-pandemic levels of activity and usage, and there will be rent increases as a result of low supply.
Vietnam’s office workforce is less likely to work from home than in other regions, keeping demand for desk space. There is also great demand for talent, and companies will continue to invest in their office space to attract and retain the best.
There are great opportunities for new commercial developments in non-core locations as companies adapt how they allocate their office footprint between headquarters and alternative locations.
Investment into industrial and manufacturing is also strong with many new industrial parks being put into operation. There is continuous investment from international and local developers in the logistics sector which will create more opportunities for companies operating within the supply chain, offering benefits both in terms of quality and costs to occupiers.
We anticipate a slower improvement in retail performance but hospitality is likely to see a greater rebound. We are already seeing interest from our clients committing to travel here since restrictions have been lifted.
A lot of regional investor capital has been building up in anticipation of the hospitality's reopening, and there will be some good allocations to Vietnam. However, I think investors will be disappointed to find that there is little distress and should not consider Vietnam to be cheap.