|Chris Carver, managing director of Vietnam and head of Valuations Southeast Asia at Cushman & Wakefield |
In the last quarter of 2021, we saw multiple positive signs for a stronger growth outlook in 2022 for real estate. Import and export turnover of goods still had a fair growth outlook, with foreign investment capital in 2021 also increasing by 9.2 per cent over the same period to $31.15 billion.
With the economy gradually getting back on track, the real estate market has also gathered momentum in recent months, mainly focusing on the housing segment in key cities such as Ho Chi Minh City and Hanoi. Sales in each city were recorded at a high level, with many apartment projects achieving a record number of sales from the first launch of the project.
Ho Chi Minh City also completed the auction of four golden land lots, with a total area of more than 30,000 square meters in Thu Thiem New Urban Area on December 10, with a total amount of more than VND37 trillion ($1.6 billion). The success of the auction made a great impression on investors in Ho Chi Minh City and the country more broadly.
We expect when Thu Thiem gradually completes the planning, investors will focus on developing within the commercial sector, contributing to the market supply and reducing the pressure of commercial office land scarcity within the central area.
Grade A office rents in Ho Chi Minh City remained stable, with a strong occupancy rate of 90 per cent. It is expected that rental prices will tend to increase again when the pandemic is under control and economic activities are reactivated. While teleworking practices are likely to be more widely adopted, the impact of this model on demand is expected to be small in the immediate term, as the majority of workers are still eager to return to work in the office.
The retail, entertainment, and tourism sectors have been hit the hardest in 2021; however, thanks to the government’s financial support policies and low-interest loan programs, there have not been many significant divestments of these assets. Non-essential retail goods are not part of this trend and many young businesses have had to close in recent times. The strength of the recovery in domestic consumption flows, e-commerce, and tourism will push the market to grow again.
The hottest market sector in the last 18 months is unsurprisingly industrial, as all types of industrial real estate have become attractive in the past year or two. This market has demonstrated both good resilience and growth prospects, and has attracted strong investor interest with record investment volume and returns.
E-commerce has seen historical growth, with consumers increasingly consuming domestically produced goods, which will spur new investment opportunities in logistics assets. The lack of high-tech assets, modern warehousing space, and strong demand from businesses in the region are driving the potential for growth of the overall logistics market. Businesses with a speedy approach to market and proximity to consumers will be the winner of the supply chain network.
Domestic and foreign investors within a footprint in Vietnam are being very targeted with their investment strategy by continuing to buy assets or via joint venture opportunities with reliable local real estate developers. We expect the industrial sector to continue to attract inflows and boost performance, with increased supply matching strong demand. The potential of the ‘build to suite’ will be significant as investors seek to diversify risks, optimise investment performance, and increase competition in the supply chain. This will benefit developed and emerging markets across Asia-Pacific, reflecting different commercial investment prioritisation strategies.
Some of the other important challenges facing Vietnam are the lack of infrastructure, despite the relatively high budget for infrastructure when compared to other countries.
Cushman & Wakefield notes that many infrastructure projects in Vietnam have had to be delayed due to the process of compensation, site clearance, and capital attraction. When compared to neighbouring countries in the region, Vietnam still has high documentation costs and inefficient customs procedures.
To attract foreign investment and stay ahead of the trend, especially in the context of Industry 4.0, Vietnam needs to improve its infrastructure network and administrative procedures. In addition, the country will need to pay more attention to skilled human resources and encourage innovation in media and technology.
Better business confidence and consumer sentiment will continue to drive new investment strategies. In particular, multifamily residential properties and alternative properties, such as data centres, pharmaceutical storage, and life sciences are on the radar of investors looking for higher returns and leveraging next-generation technologies. The industry’s strong growth prospects and portfolio diversification advantages are fuelled by a lack of supply and also a lack of investment-grade assets.
The market is growing and maturing at a faster rate than before. Market participants from project developers and investors to banks and state regulators are more alert and cautious in each of their actions and roles. Cushman & Wakefield strongly believes in the development of the real estate market in the near future, and specifically, 2022 looks to be a year of cautious opportunity.