The Northern Real Estate Market: Ready To Accelerate

Hanoi and the 5 key provinces of the North remain to be in the top 10 hotspots for FDI investment in Vietnam, with a total investment volume of 16,7 billion USD in 2023, according to Ministry of Planning and Investment. Growth is driven by the macro economy, improved policies, domestic demand and technological advances. Some major investment projects in 2023 in the Northern region are Thermal Power Plant's project with an investment of 2 billion USD in Thai Binh, Jinko Solar Hai Ha's 1.5 billion USD project in Quang Ninh, LG Innotek Vietnam increased its investment capital by 1 billion USD in Hai Phong and Amkor Technology's semiconductor factory invested 1.6 billion USD in Bac Ninh.

Trang Bui, Country Head of Cushman & Wakefield shared:

"According to Cushman & Wakefield's research, the real estate market in Hanoi and key Northern provinces has become extremely attractive and is ready to accelerate to welcome the investment capital in the next phase of the development cycle. The North's growth is due to excellent accessibility through the infrastructure network of 7 expressways, and the continued implementation of the 7 ring roads system; The region's geographical location is favorable for a wave of investment expansion from major manufacturers, as part of the China + 1 strategy.”

Our report documents the movements of the Northern real estate market over the past decade and aims to provide a future landscape to help investors have an overview to seize business opportunities in 2033. The report focuses mainly on 5 types of traditional real estate and briefs through non-traditional specialized real estate models.

Grade A & B office

The majority of office projects are still concentrated mainly in the central area of Hanoi, especially the districts of Ba Dinh, Dong Da, Cau Giay, Nam Tu Liem. During 10 years of development, as of Q1 2024, the total office supply in the North reached 1.7 million sqm from 121 projects. The office renovation trend toward shared and hybrid workspaces continues to be popular. The technology, co-working, logistics, insurance and professional services industries will remain the main demand drivers for office leasing.

Ngoc Le, Head of Commercial Leasing at Cushman & Wakefield Vietnam commented:

“In the next 10 years, we forecast that the Northern market will have abundant office supply and develop along the corridor from Hanoi to Hai Phong. It is estimated that by 2033 there will be 48 new office projects, reaching at least 3.2 million sqm, double the current amount. This could create pressure on absorption rates and push rents to adjust gradually. Office project investors will need to have strategies to increase competitiveness in the market to attract tenants, especially in meeting ESG needs.”

Shopping centers and retail podiums

The recent launch of the Lotte Mall Tay Ho project has attracted more than 20 new brands coming into Vietnam. At least 2 more retail projects are also planned in this area by 2030.

Outside of Hanoi, we recognize that domestic investors such as Vincom Retail are still at the forefront of popularizing the shopping center model to other provinces, through residential or urban projects. The total supply of commercial centers and retail podiums throughout the North in Q1 2024 reached 1.8 million sqm with 92 projects concentrated in Hanoi, Hai Phong and Quang Ninh.

Consumers have gradually shifted from spending on essential goods to spending on services and entertainment in recent years. Retail sales related to concerts, performances, entertainment, travel, sports and dining have grown strongly. This motivates some foreign investors to expand their footprint beyond Hanoi. Some examples include AEON Hai Duong, AEON Hai Phong Thuy Nguyen and GO! Ha Nam. It is estimated that by 2033 the North will have at least 57 new retail projects, bringing the total minimum supply to 2.8 million sqm distributed widely throughout the provinces.

Industrial and Logistics

The Northern region has maintained its position as an extended arm of the world's factory for decades. With the support of a complete infrastructure system, the industrial real estate market continues to grow and develop along the corridor from East to West. The total supply of industrial land in the North as of Q1 2024 reached 14,600 hectares from 71 projects. We expect that in the next 10 years, the market will have 69 new projects, increasing the supply to at least 30,000 hectares.

“As for demand, we also note two clear trends taking place. First, basic goods manufacturing continues to benefit from a wave of investment expansion from large manufacturers, as part of the process of diversifying the supply chains of global businesses. And second, the Northern manufacturing industry is moving up the value chain after receiving large-scale investments in the semiconductor, electronics and high-tech sectors," Trang Bui commented.

Similarly, the ready-built factory and warehouse market, although only developing since 2018, has proven its ability to accelerate rapidly, with a growth rate of nearly 4 times by 2023. Total supply throughout the North as of Q1 2024 reached 6 million sqm and is forecast to continue to increase to 17 million sqm in the next decade. Although new supply has increased vacancy rates, overall market demand is still relatively strong. Third-party logistics companies (3PLs), e-commerce and retail remain the main drivers of demand. Leading logistics businesses operating warehouses in the North have begun to further explore the application of digital technology and integrated platforms, helping to improve distribution efficiency.

It is noted that the North has had many green industrial projects and the number of green projects continues to grow. Specifically, Vietnam has about 150 projects receiving LEED certification, up to 67% of which are industrial real estate projects, but mainly ready-built factories, warehouses and manufacturing plants. However, Vietnam still does not have a specific, clear set of standards for large scale green industrial park.

Hotel market

The growing industry leads to increased demand for hotels from businesses across the region. As of Q1 2024, approximately 20,000 rooms at 104 four and five star hotels are operating in the Northern region, with most of the supply supporting business and tourist demand.

The number of tourists to the Northern provinces has recovered compared to pre-epidemic times, reaching 61 million by 2023, according to statistics from the Department of Culture, Sports and Tourism.

While the majority of local Hanoi hotels cater to the budget middle classes, the popular 'Old Quarter” area in particular is dominated by cheap accommodations and backpackers. Samsung is the main group of corporate customers in terms of hotel room demand. This Korean electronics giant produces nearly half of its smartphones at two factories in Bac Ninh and Thai Nguyen, near Hanoi.

International operators IHG, Pan Pacific, Accor, Hilton and Marriott currently have their hotel brands in the market. By 2033, it is estimated that the entire market will have 66 new hotel projects, bringing the total number of rooms to at least 34,000 to serve the recovering and growing demand.

Housing market

The Northern housing market had impressive development in the years 2018-2019, then somewhat slowed down due to the stagnant global economy. Both investors and buyers are still waiting for approval and implementation of the new land law.

As of Q1 2024, the area has 670 apartment projects with 370,000 units. Future supply will continue to spread to the west and suburbs of Hanoi as well as neighboring provinces within a 30km radius from the city center such as Bac Ninh and Hung Yen. At the same time, more and more large-scale urban centers are participating in the market, forming new satellite cities in the future in Quang Ninh and Hai Phong. It is estimated that by 2033, the market will have more than 1,000 projects with at least 650,000 apartments throughout the region.

Similarly, the landed house market currently has 550 projects with 120,000 units and is expected to double in the next 10 years. The market also noted the development of projects outside Hanoi, targeting green models and sustainable lifestyles focusing on people.

“With strong inherent advantages and continued infrastructure plans, the real estate market in the Northern region has many advantages and seems ready to accelerate to a new level in the development process.” Cuc Le, Head of Research and Advisory at Cushman & Wakefield Vietnam commented.

While the world is talking about ESG and 80% of current buildings will still exist by 2050 and continue to emit carbon emissions, what should real estate investors and users do?

When considering project planning and development, one must always start from the appropriate model. The most optimal model for the future will focus on shifting to human-centered factors. In particular, the concept of placemaking is a new concept to promote the ability to live in urban areas. This model requires projects to be appropriately planned and built so that all spaces within the project and urban area can be accessed by citizens of all ages and abilities. In past decades, real estate has somewhat separated living, working and playing, now projects need to merge all three, creating more semi-public and high-quality spaces for social activities. meetings, entertainment, events and social interactions.

“To bring about sustainable development and long-term benefits, investors, developers and parties involved in real estate in the region need to be equipped with the right strategy now. Therefore, we expect the concept of placemaking to be promoted and increasingly popular in planning considerations for all real estate projects.” Trang Bui concluded.