Ho Chi Minh City and Hanoi Among Top 10 Fastest-Developing Cities Globally

HCMC and Hanoi Shine in Savills’ Growth Hubs Index

Vietnam’s Ho Chi Minh City (HCMC) and Hanoi have earned impressive rankings on Savills’ Growth Hubs Index, placing second and sixth respectively. This index, an extension of Savills’ Resilient Cities Index, forecasts the economic growth of 230 cities up to 2033, with data sourced from Oxford Economics. The index only includes cities with a GDP of at least US$50 billion in 2023, also factoring in future country-level credit ratings.

Economic Growth Factors

Indian and Bangladeshi cities dominate the list, expected to see over 68 percent GDP growth in the next decade. Leading the list is Bengaluru, India, followed by HCMC. Savills attributes HCMC’s growth to an increase in high-income households, while Hanoi’s expansion is driven by rising personal wealth and a burgeoning middle class.

Infrastructure and Investment

Vietnam is set to leverage strong foreign direct investment (FDI) inflows over the next decade by enhancing infrastructure, regulations, and planning. The country invests around 6 percent of its GDP in infrastructure—the highest in the region—financing major projects like Long Thanh International Airport and new road and port developments. This new airport, located 40 km east of HCMC, will complement the existing Tan Son Nhat International Airport.

Sector Shifts and Contributions

Vietnam’s economy has shifted from traditional low-cost manufacturing to high-tech and more intensive tertiary manufacturing, including solar panels, electric vehicles, and electronic components. Major contributors to Vietnam’s GDP include South Korean tech giants Samsung and LG Corp, as well as US firms like Intel and Apple.

Office Market Performance

HCMC’s office market remains robust, with a 92 percent occupancy rate. The retail sector is also thriving due to domestic demand and modernization efforts. Knight Frank’s report highlights two new Grade A office buildings, The Nexus and VP Bank Saigon Tower, in Q1 2024, boosting 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.

Hanoi’s Grade A office market is focusing on green development, with all upcoming buildings aiming for green certifications. 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.

Job Market Trends

In HCMC, 77,500 to 86,000 job vacancies are expected in Q1 2024, with the trade and services sector accounting for the majority. Hanoi’s labor market is poised for recovery, with local businesses requiring 100,000-120,000 workers from late 2023 to early 2024. The trade and services sector anticipates a 20 percent hiring surge, with increased demand in manufacturing, industrial processing, and IT sectors.

High-Tech Investments and Challenges

Hanoi attracts significant high-tech manufacturing investments but struggles with air quality issues. Improved infrastructure aims to create cleaner environments within an hour’s travel from the city.

HCMC attracted US$915.6 million in FDI in the first four months of 2024, while Hanoi secured US$1.13 billion in the same period. HCMC also saw a 68.3 percent increase in value from foreign investors' capital contributions and share purchases, despite a 5.6 percent decrease in deal count.

Industrial and Housing Market Insights

HCMC’s industrial production index grew by 5.3 percent in the first five months of the year. The city’s exports increased by 14.2 percent to US$18.6 billion, while imports rose by 6.3 percent to US$22.8 billion. HCMC and Hanoi 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.

Rising Wealth and Retail Space Demand

HCMC is emerging as Asia’s next big millionaire hotspot, with the number of millionaires doubling in the last decade. The city now boasts 7,200 millionaires, 24 centi-millionaires, and 3 billionaires. There is a growing demand for prime retail space in HCMC’s downtown District 1, driven by luxury brands. The Vietnamese luxury goods market is expected to generate US$992.20 million in 2024.

Conclusion

Overall, HCMC and Hanoi are on track 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, offering compelling prospects for foreign businesses through strategic investments in high-tech manufacturing, infrastructure, and retail.