Vietnam to be in a strong position

 

Vietnam’s current real estate market is generally under-supplied in all sectors, including residential, office, retail, hotel and industrial. Because of the under-supply, and the relatively high returns on investment that can be achieved in the property sector, it has caught the attention of both domestic and international property developers.

The property market was on the increase even before WTO accession in January 2007, and the momentum of gaining WTO membership has put Vietnam firmly on the radar screen of many multinational companies, particularly those with a focus on and presence in Asia.

 

As evidenced by the number of building projects in all major centres of Vietnam, the country is gearing up for more and more foreign investment, especially in the office market sector. However, infrastructure projects must keep pace with commercial and residential property projects. To attract more foreign investment, the law on foreign property ownership should be reconsidered.

 

In Hanoi, we have at least 350,000 sq.m of Grade A & B space coming on stream in the next 2 years, compared to the 250,000 sq.m that exists currently. Many new multinational companies will come to Vietnam over the next few years, and require high quality living and working space. Grade A office and apartment buildings in good locations will be asking the highest rental rates.

In the next 2 years the real estate market will continue to suffer from a lack of supply, especially in the Grade A office sector, hence rentals will continue to rise.  The B grade sector, however, will ease as developments in the new commercial corridors of Hanoi come on line. Similarly high end apartments prices will continue to rise while a lack of new stock is entering the market, this rise partly due to profits shifting from the stock market to the real estate sector.

 

 

If we compare our market to Thailand, for instance, where political change has created uncertainty and slowed down condo sales, and Malaysia where the proposed scrapping of capital gains tax will hopefully begin a real estate cool down, Vietnam appears to be in a strong position.

 

 

CBRE has been at the forefront of leasing prime office space, both to prestigious local and multinational companies, and selling medium to high end condominiums to investors and occupiers. This is the market area we will continue to focus our business on, and work closely with international and local developers that can tap CBRE’s extensive experience in Vietnam.

 

The two parties involved should try to find a compromise benefiting both parties, and also benefiting the tenant community, that finds itself in a very tight position currently.