Five key trends to watch out for in the Vietnam property market this year

By Quynh Mai - Feb 21, 2020 | 08:23 AM GMT+7

TheLEADERThe real estate consultancy anticipates elevated investment activity, sustainability and technology to be the next focus.

Over recent years, Vietnam has entered a journey of international integration and creating an export-driven economy. Securing a large number of FTAs has set Vietnam up for a partnership with 60 countries worldwide, and support Vietnam on its path to become the new global manufacturing hub.

Demogrpahic-wise, over the next two decades, Vietnam will enter the golden age. Employment in manufacturing and services has increased. The Millennial population will be the main drivers of the economy in the next few years.

As a new decade dawns, JLL reveal five key trends to watch out for in the Vietnam property market in 2020.

The future of retail

In the fast-changing retail sector, success has never been more dependent on the supply chain. Omni-channel is adding new layers of complexity to retail logistics: it’s no longer just getting products onto shelves but making them available anytime and anywhere.

As a new trend in the market, both retailers and mall developers are ire inventing themselves with focus on F&B and experiential retailers, providing better customer services and applying technology, consumer analytics to enhance their popularity and increase foot traffic.

With consumers increasingly shopping online, buying decisions often rest on how quickly and efficiently retailers can get goods out of the warehouse and into their hands.

Yet it comes at a financial cost; pressure from e-commerce competitors only adds to the squeeze on retailer margins. As omni-channel retail evolves and consumer expectations around delivery increase, supply chain and logistics management will be crucial differentiators for retailers.

Limited new supply continues as approval process prolongs

According to the latest report from JLL, about 30,000-35,000 units are expected to be launched officially in Ho Chi Minh City and 40.000-45.000 units in Hanoi in 2020. It should be noted that the number is subject to a great deal of uncertainty given the government’s tight control in granting land use rights and construction licences.

Strong demand is set to carry on and will boost the price further across all sectors. However, the demand in high-end segment, especially from investors, is likely to slow down in long term as their already-high price level and low rental yield make it a less attractive investment.

Sustainability and more - enabled by technology

The green movement got a tremendous boost when ‘fine dust’ and ‘virus’ become the buzzwords. As people rush to buy mask, landlords race to upgrade their buildings to protect workers and enhance profits as investments in indoor air quality and hygiene help to differentiate office buildings from competitors.

Stephen Wyatt, Country Head of JLL Vietnam, comments: “But sustainability is not just a trend, it has to be the future of work. The next generation of buildings is set to become more ‘green’, with sustainable technologies to save on operating costs and innovative design to attract more occupiers and tenants.”

Industrial sector will continue to lead the market

Industrial is still the hottest sector in the market with demand growing strong as companies are still looking to relocate from China amidst political uncertainty. Even before the trade war, significant interest from foreign investors had led to land value and rental rate increasing.

Manufacturing is the sector with the most significant investment in the past ten years, and JLL predict that it will continue to dominate the market in the next few years.

In the coming time, JLL expects to see a growth in medium to long-term investors in the industrial sectors, backed by government support, free trade agreements and movement from China. Logistics is expected to be the future of the industrial market. In recent years, increasing demand from both traditional retails and continuous growth from ecommerce sectors has put great pressure on existing supply chains, facilities and warehouses.

JLL predicts that the growth of retail will contribute to investment activities for the current shortfalls of the industry.

Offices go bigger and more connected

Office space remains a hot commodity as rents soar past the recent peak to reach a decade high. Rental rates in Grade A and B increase was supported by strong demand and higher rental rates in newer office developments. Tenants are struggling to find bigger space as in the current market, only one Grade A building and ten Grade B buildings can provide a contiguous space larger than 1,000 sqm.

The demand for large office space will accelerate in the next few years as co working operators grow in numbers and companies look to upgrade their office to retain talents and expand business.

Larger and more flexible space means better chance of collaboration plus energy and space utilization.

Overall, macroeconomics like urbanisation, growth in smart phone and Internet usage and the portion of aging population will fuel demand for alternative investment choices. Apart from the aforementioned trends, alternative real estate such as senior and student housing, data centre and cloud kitchen will be popular to investors in the next few years.