HCMC, Hanoi Among World’s 10 Fastest-Developing Cities: New Report

HCMC, Hanoi on Savill’s Growth Hubs Index

Vietnam’s Ho Chi Minh City (HCMC) and capital Hanoi have been ranked second and sixth, respectively, on the list of the world’s fastest-developing cities, according to the Growth Hubs Index released by property consultancy Savills. This index is an extension of Savills’ Resilient Cities Index, forecasting the economic growth of 230 cities up to 2033.

Indian and Bangladeshi cities, expected to experience over 68 percent GDP growth in the next decade, dominate the list. Bengaluru, India, leads the Growth Hubs Index, followed by HCMC. The data for this analysis, sourced from Oxford Economics, includes only cities with a GDP of at least US$50 billion in 2023 and considers future country-level credit ratings.

Savills attributes HCMC’s robust forecast to a significant increase in high-income households, while Hanoi’s growth is driven by rising personal wealth and an expanding middle class.

READ: Choosing the Right Location for Your Business in the Asian Market

Growth drivers

Vietnam is preparing to capitalize on strong foreign direct investment (FDI) inflows over the next decade by improving infrastructure, regulations, and planning. The country allocates approximately 6 percent of its GDP to infrastructure, the highest in the region, funding major logistics projects like the Long Thanh International Airport and extensive new road and deep-sea port developments.

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Of note to investors and business travelers will be the ongoing construction of Long Thanh International Airport, located about 40 km east of HCMC in Đồng Nai Province. Once completed, it will be the second airport serving the HCMC metropolitan area, complementing the existing Tan Son Nhat International Airport.

In terms of sector-wise focus, the Vietnam economy has transitioned from traditional low-cost manufacturing to high-tech and more intensive tertiary manufacturing. This shift includes producing solar panels, electric vehicles, chips, laptop batteries, phones, monitors, and associated components. Key players like South Korean technology giants Samsung and LG Corp significantly contribute to Vietnam’s GDP and US tech leaders Intel and Apple have similar long-term investment and local production commitments.

Office space

HCMC, a traditional gateway for FDI into Vietnam, boasts a strong office market with a 92 percent occupancy rate, according to Savills. The retail sector is also flourishing, driven by domestic demand and modernization efforts.

According to a Knight Frank report, HCMC saw the addition of two new Grade A office buildings, The Nexus and VP Bank Saigon Tower, in Q1 2024, contributing 55,371 m² of net leasable area (NLA). This increased HCMC Grade A asking rents to US$58.06 per m² per month, a rise of 1.98 percent quarter-on-quarter and 0.3 percent year-on-year. Grade B offices in the city also performed well, with stable rents at US$34.31 per m² per month and a vacancy rate drop to 9.0 percent. Large transactions over 10,000 m², particularly in the technology sector (75 percent), retail (9 percent), and pharmaceuticals (6 percent)—mostly for relocation purposes (94 percent)—reflect growing demand from foreign businesses, indicating a positive outlook for Vietnam’s commercial real estate market. Many of the firms relocating had a need for larger office space than their previous location. Knight Frank notes: “Looking forward to the end of the year [2024], new supply for Grade A will come from The Sun Tower in CBD with 80,000 m2 and 52,780 m2 for Grade B with Etown Central in Non-CBD and D’Saint Raffles in CBD.”

Meanwhile in Hanoi, the Grade A office market is set to remain resilient in 2024, with a strong focus on green development. All upcoming buildings are aiming for green certifications, and existing ones are seeking similar credentials, per a report from JLL. The delayed Grand Terra 36 Cat Linh project is expected to open this year, increasing the total CBD Grade A office supply to approximately 367,100 sqm by the end of 2024. The non-CBD submarket in Hanoi is also expected to see a rise in rents, though growth may be moderated by increased competition due to new supply. Upcoming office projects in Hanoi include the Taisei Hanoi Office Tower, Heritage West Lake, My Dinh Pearl, Shilla Tower, Hanoi Hilton West, TNR Goldmark City, Tien Bo Plaza, Capital Elite, and Oriental Square.

Job creation

In Ho Chi Minh City, the Center of Forecasting Manpower Needs and Labor Market Information projected that there would be 77,500 to 86,000 job vacancies to be filled in Q1 2024. The labor market distribution showed that the trade and services sector would account for 72.63 percent of the vacancies, followed by industry and construction at 27.23 percent. The agriculture, forestry, and fisheries sector will have the smallest share, accounting for just 0.14 percent of the labor market.

In the case of Hanoi, despite challenges, the labor market is poised for recovery in 2024 with rising employment and a decreasing jobless rate, as per Vu Quang Thanh from the Hanoi Center for Employment Services. Around 100,000-120,000 workers will be required by local businesses from late 2023 to early 2024. The trade and services sector anticipates a 20 percent hiring surge, while manufacturing, industrial processing, electronics, textiles, footwear, and construction sectors are expected to increase hiring by 10-15 percent. Moreover, sustained demand for science and IT jobs is predicted due to global trends, and the real estate sector, previously stagnant, is anticipated to experience a significant uptick in recruitment.

Investments

Hanoi has also attracted significant high-tech manufacturing investments, although its air quality remains a challenge. The city’s geographical location traps pollution, earning it a spot among the world’s most polluted cities. However, improving infrastructure is fostering the development of cleaner, natural environments within an hour’s travel from the city, mitigating some pollution concerns.

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In the first four months of 2024, HCMC attracted US$915.6 million in FDI, a 6.5 percent decrease compared to the same period last year. Meanwhile, Hanoi attracted a total of US$1.13 billion in the first four months of 2024. 

In the first four months of 2024, 652 foreign investors in HCMC increased their capital contributions and share purchases to US$713.5 million, a 5.6 percent decrease in deal count but a 68.3 percent increase in value compared to the previous year. South Korea and Singapore were the largest contributors, accounting for 40.9 percent and 33.9 percent respectively. While 357 new projects were granted investment certificates—a 16.3 percent increase—their total investment fell by 24.3 percent to US$129 million, per reporting from Vietnam Investment Review.

During the same period, Hanoi recorded 73 newly licensed foreign-invested projects with an accumulated FDI intake of over US$1 billion. In addition, 47 projects received additional investment totaling US$79 million, while foreign investments injected a total of US$45 million in contributed capital or purchased shares.

READ: Hanoi Attracts Over US$1 Billion in FDI in First Four Months of 2024

Industrial and housing market insights

HCMC’s industrial production index grew by 5.3 percent in the first five months of the year, the fastest pace in three years. The city’s four main industries showed varied performance, with growth in pharmaceuticals, food processing, and mechanical engineering, while electronics saw a contraction.

Exports increased by 14.2 percent to US$18.6 billion, and imports rose by 6.3 percent to US$22.8 billion. FDI fell by 17.1 percent to US$950 million, while public spending increased by 18 percent to VND 10.9 trillion (US$428.35 million) (US$1=VND 25,446).

Hanoi and HCMC rank among the most expensive cities in Asia for housing rentals, with a median monthly rent of US$688 for a one-bedroom apartment in prime areas. This places them in joint 10th position in a survey by European market researcher Global Property Guide. The cost to buy a one-bedroom apartment in these areas is about US$214,500, significantly higher than in cities like Jakarta (Indonesia), Mumbai (India), and Manila (the Philippines).

Rising wealth and retail space demand

HCMC has emerged as Asia’s next big millionaire hotspot, with the number of millionaires doubling in the last decade. The city now has 7,200 millionaires, 24 centi-millionaires, and 3 billionaires, according to Henley & Partners’ 2024 Wealthiest Cities Report. Vietnam and Singapore are the only Southeast Asian cities in the report, with Singapore ranking as the fourth richest city globally. The rise in HCMC’s wealthy population is attributed to rapid growth in technology, financial services, electronics, tourism, and textiles.

There is a growing demand for prime retail space in HCMC’s downtown District 1, driven by luxury brands, according to Savills’ data. Retail activity in HCMC remains stable, with an occupancy rate of 92.5 percent. Fashion leads the retail transactions, followed by food and beverage and health and beauty. The Vietnamese luxury goods market generated US$957.22 million in revenue in 2023, with a forecasted increase to US$992.20 million in 2024, per data from Statista.

Takeaway

Overall, both HCMC and Hanoi are poised for significant economic growth, supported by substantial infrastructure investments and a favorable business environment. This positions them as key players in the global landscape of rapidly developing cities. They also offer compelling prospects for foreign businesses through strategic investments in high-tech manufacturing, infrastructure, and retail.

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