Hosted at the swanky 18th floor office of First Alliances, complete with on-trend egg swing chairs, panoramic river views and a gin bar courtesy of Song Cai Distillery, the ‘Real Estate & Tech Sector in a Changing World’ panel discussion organized by Sonatus, Orbital and Vietcetera displayed all the elements of a conference done right. Or, in the words of one of the panelists, it was the perfect “whale and shark” sighting opportunity.
As Vietnam’s developers, landlords, and tenants mingled over G&Ts, Greg Ohan, Co-Pioneer and CEO of The Sentry, a home-grown property management company, took to the stage with an overview of Vietnam’s real estate industry post-covid.
The year of the landlord
Giving an example of Sonatus, a new premium office building located at 15 Le Thanh Ton and managed by The Sentry, Greg pointed out that the building’s committed occupancy rate of 83% by year-end is unheard of in the industry. And yet, such is the reality of Vietnam’s real estate sector in the wake of covid-19. “With limited supply, the office market is expected to remain stable”, he continued.
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Panel 1: Real estate drivers in a changing world
Opening the panel discussion, the CEO of LOGOS Vietnam Glenn Hughes spoke of the group’s first Vietnam-based asset – a 13-hectare development site within the VSIP Bac Ninh Industrial Park. For LOGOS, expansion into the country happened in direct response to the increasing demand from clients in the region, he said. While a few years ago it was mainly Chinese investors targeting Vietnam, now the country is in everybody’s sights. Facing this huge demand pressure, Vietnam is likely to see land and construction prices for industrial parks go up, in addition to the country-specific challenges such as the slow land clearing process.
“Vietnamese love buying property”, quipped Andy Han, CEO of SonKim Land, by way of explaining why SonKim Land’s luxury integrated development The Metropole Thu Thiem has been a runaway success. From central location to ongoing and planned infrastructure improvements, the development was popular from the onset. But what has been really driving sales are The Metropole’s ability to meet the demands of the post-covid world: non-touch design and the innovative 99% dustless air ventilation system. With people spending more time indoors, there is an increased demand for larger apartments too, Andy noted. He expects sales of 3-bedroom units and penthouses to spike as the Vietnamese are looking for smart investment opportunities.
Asked by Vietcetera’s Hao Tran, the moderator, about the expansion strategy for his restaurant group, the CEO of Redwok Rafik Mankarious invited the audience to “look at the ecosystem and do a reality check”. While growth in Vietnam is explosive right now, at close inspection all the activity is happening at the top of the food chain, while B and C consumers are underserved, he argued. To bridge the gap, growth-minded businesses should consider co-development and projects that have a lifestyle aspect to them. Until there’s enough competition in the mid-range segment, the situation is not likely to change and tenants will remain trapped “in indentured servitude” with landlords dictating everything from operating hours to renovation timelines, he concluded.
“For a relationship between the landlord and the tenant to work, there needs to be a give-and-take”, retorted The Sentry’s Greg Ohan. He called for a mutual understanding that whatever rent holiday or other interventions to support the tenants were introduced during covid-19, there will be an adjustment when things get better.
Panel 2: The role of real estate
Thuy Hoang, the General Director of Sonatus and Orbital, presented Quang Trung Software City (QTSC) in District 12, the first and largest software park in Vietnam and home to 165 ICT companies with over 20,000 people living, working and studying in the area. She spoke of Business Process Outsourcing (BPO) companies operating in the country and looked at how Vietnam’s real estate can better accommodate the needs of the sector.
Comparing today’s real estate options with what was available to BPOs in Vietnam in the early 2000s, Frank Schellenberg, CEO of DIGI-TEXX, a BPO operator based in QTSC, admitted that although power outages and unstable internet connectivity are a thing of the past, challenges remain. Since BPO companies require 24/7 services, the demands on the buildings are immense, making timely maintenance crucial. Other issues are the need for a better personal data protection and having to cast vast recruitment nets in a shallow talent pool.
Anatolijus Fouracre, the CEO of Swiss Post Solutions, another BPO operator based out of QTSC, agrees that working in favor of industrial and IT parks outside of the city’s core is their proximity to residential areas with lots of potential workers. He also sees poor building maintenance as one of the main challenges and an opportunity for property management companies to make their mark.
According to Long Lam, the CEO of Quang Trung Software City, industrial and IT parks have a potential to play an even bigger role in the post-covid world as such developments help companies save costs: whether by allowing them to move out of the downtown area completely or by combining a centrally located head office with a back office in a remote but talent-rich area.