Hanoi and Northern Provinces: A Focal Point for FDI in Vietnam

Hanoi and its neighboring provinces continue to demonstrate their significance in the landscape of Foreign Direct Investment (FDI) in Vietnam. In 2023, these regions ranked among the top ten FDI hotspots, collectively attracting an impressive investment volume of $16.7 billion. This surge can be primarily attributed to a robust macroeconomic environment, favorable policies, rising domestic demand, and advancements in technology.

Significant Investment Projects in 2023

Several major projects highlight the investment landscape in the Northern region this year. For instance, the Thermal Power Plant in Thai Binh has received a hefty investment of $2 billion. Likewise, Jinko Solar Hai Ha’s initiative in Quang Ninh is backed by a $1.5 billion investment. There’s also LG Innotek Vietnam, which has ramped up its investment by $1 billion in Hai Phong, and Amkor Technology has launched a $1.6 billion semiconductor factory in Bac Ninh.

These initiatives are not just numbers; they represent a significant shift in investment strategies, particularly amid the global push for diversification and enhanced supply chain resilience.

Real Estate Market Dynamics

According to Trang Bui, Country Head of Cushman & Wakefield, the real estate sector in Hanoi and the key northern provinces is becoming increasingly attractive. With the projected growth of the region, outstanding infrastructure, including seven expressways and an extensive system of ring roads, plays a critical role. This accessibility is pivotal as large manufacturers look to expand their operations in line with the China + 1 strategy.

Grade A & B Office Space

The office market remains concentrated primarily in Hanoi’s central districts, such as Ba Dinh, Dong Da, and Cau Giay. As of the first quarter of 2024, the total office supply in the North has reached 1.7 million sqm from 121 projects. A rising trend towards shared and hybrid workspaces continues to shape the demand for office leasing, primarily driven by sectors like technology, co-working, and professional services.

Ngoc Le, Head of Commercial Leasing at Cushman & Wakefield, anticipates that the Northern market will see an influx of office projects, estimating that by 2033, 48 new projects will bring the total supply to at least 3.2 million sqm. This growth could generate pressure on absorption rates and influence rental adjustments.

Retail and Shopping Centers

The retail landscape is also evolving. The recent launch of the Lotte Mall Tay Ho project has successfully attracted over 20 new brands to Vietnam. Domestic investors, such as Vincom Retail, are also investing in shopping centers across various provinces, with the total supply in the North reaching 1.8 million sqm in the first quarter of 2024.

Consumer behavior is shifting, with an increasing preference for services and entertainment over essential goods. Retail projects like AEON in Hai Duong and Hai Phong are expanding beyond Hanoi, in an effort to cater to this growing demand.

Industrial and Logistics Growth

The Northern region is positioned as a global manufacturing hub, thanks to its robust industrial real estate market. As of the first quarter of 2024, the total supply of industrial land reached 14,600 hectares, with significant expansion expected. With 69 new projects planned, supply could burgeon to 30,000 hectares over the next decade.

This growth is underscored by two key trends: a surge in basic goods manufacturing driven by major manufacturers diversifying their supply chains, and a move towards higher-value production in the semiconductor and high-tech sectors.

The ready-built factory and warehouse market, though relatively new, is rapidly evolving with a current supply of 6 million sqm. This figure is projected to increase to 17 million sqm in the next ten years, driven primarily by e-commerce and logistics sectors.

Hospitality and the Hotel Market

The hospitality industry in Northern Vietnam is gaining momentum, fueled by a significant increase in tourist arrivals, which reached 61 million in 2023. Current hotel stock features approximately 20,000 rooms across 104 four- and five-star hotels. While budget accommodations dominate Hanoi, there is room for corporate clientele, particularly from companies like Samsung.

International hotel brands are establishing their presence, offering more options to meet the needs of business and leisure travelers alike. A projection of 66 new hotel projects by 2033 suggests a total room capacity of around 34,000.

Housing Market Trends

Despite fluctuating dynamics in recent years, the Northern housing market remains robust. As of Q1 2024, there are 670 apartment projects totaling 370,000 units. The area’s housing stock is expected to expand significantly, particularly in suburban areas and neighboring provinces.

The landed house market is similarly poised for growth, with current projections suggesting the launch of over 550 projects with 120,000 units. A focus on sustainable models is evident as developers align with contemporary living standards.

The Future: A Focus on Sustainability and Human-Centric Development

With an evolving real estate landscape, the emphasis is shifting towards sustainable development. As highlighted by Cuc Le, Head of Research and Advisory at Cushman & Wakefield Vietnam, the Northern region’s market holds substantial advantages poised to propel it to new heights.

As the conversation around Environmental, Social, and Governance (ESG) principles intensifies, there’s a need for real estate developers and investors to integrate human-centered models into project planning. The concept of placemaking advocates for developments that promote community and accessibility, merging living, working, and social spaces for a more vibrant urban life.

By addressing these complex issues and opportunities, the Northern region’s real estate market stands on the brink of transformation, ready to attract further investment and foster sustainable growth for years to come.

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a global leader in commercial real estate services with nearly 52,000 employees operating in almost 400 offices across 60 countries. Its 2023 revenue was $9.5 billion, covering various services including leasing, project management, and valuation. For more information, visit Cushman & Wakefield.