In 2020, and into the first quarter of 2021, FDI into Viet Nam Real Estate has faced a great deal of difficulties, with two core reasons, one the ripple effects of COVID-19, and the other development projects running into legal issues. However, overseas investor interest in Viet Nam Real Estate is increasing.
Foreign developers want positions in Viet Nam, but effects of pandemic and inadequate legal procedures have limited active investment: FDI levels in 2020 did not accurately reflect levels of overseas interest in local property. However, FDI into Manufacturing helps develop more favorable conditions for the Real Estate industry. One of the very few countries recording positive economic growth in 2020, Viet Nam is also the ideal candidate to accommodate tariff related production shifts from China expanding opportunities to move up the manufacturing value chain. Assessing FDI activity in 2021, Mr. Matthew Powell, Director of Savills Hanoi said: " It continues to be positive: we are getting extensive enquiries. When speaking with international investors, they all remain extremely keen to get into Viet Nam. The investment environment here is much improved compared to years ago, and Viet Nam has the advantages of political stability, competitive salaries, and capital management policies that appeal to foreign investors”.
The fundamentals of income growth, demographics, and urbanisation that make Viet Nam so attractive have not changed. The rapid development of major infrastructure projects in Ha Noi and Ho Chi Minh City are further supported by the national transport interconnectivity program. Prior to COVID-19, Viet Nam was in a good position and while the pandemic has affected global markets, Viet Nam is doing much better than most. There is still high growth potential, which adds further appeal to FDI. Most is still into Manufacturing and while that remains a key driver of economic growth, all Real Estate asset classes gain positive effects.
Viet Nam has become a hotspot for foreign investors. Support comes from the highest level, the Prime Minister, who is determined to see provinces expand their foreign investment opportunities.
Matthew Powell, Director of Savills Hanoi remarked on the challenges for sector investors in Viet Nam: “For foreign investors, quality infrastructure such as roads, ports, and rail networks, is vital. However, in more provincial destinations where space is more price competitive, they may face less immediate access to materials, or difficulties in transporting finished export products. It is important to be in an area with easy access to key partners and transportation networks. A clear, well executed strategy, with solid financial planning is essential. Also, it is not low interest, or lack of supply. We need more 4.0 Industrial solutions - intelligent, high quality, clean and clear, easily investable projects. Savills role is to help with reliable counsel, investment support, and industrial advisory services.
In 2021, the residential, office and industrial asset classes will capture the most investor attention. “Demand growth for office space is on the rise, especially from local and international organizational expansions. Viet Nam is a key target market for MNCs, with providers of Technology, Financial Services, Life Insurance, all making gains. All these manufacturing organizations requiring office space underpins demand levels. With so many projects under-construction, new supply is likely to see the segment become far more competitive.
We have office developments in Ha Noi, such as Capital Place, providing high quality, truly international standard office space which attracts consistently high interest. The conversation continues about the traditional office model in Viet Nam losing out to more flexible, shared space working. Here, with Covid-19 so swiftly dealt with, people could quickly return to the office. No one really went remote for long enough in Viet Nam.
Office space needs have not changed, but demand is increasing for more flexible space, with greater consideration into how office space is designed to optimise its use. The traditional work-desk based office approach is evolving.” - said Mr. Powell.