JLL Report – Old buildings in Vietnam can find new commercial uses

Jones Lang Lasalle (JLL) Vietnam has just released a new report on commercial real estate trends and notes that in the current tight real estate market investors are finding value in adapting old buildings for commercial use.

JLL says that as consumer needs and demand shift that there is an increasingly large number of building that because of their age, condition and design are positioned between new developments and protected historic buildings. These older building are often thought of as redundant, unattractive and obsolete.

Dr. Megan Walters, Heal of Asia Pacific Research for JLL said, “Obsolescent buildings might be wrong for their current use, but might also be adaptable to something more suitable. Thoughtful reuse of these moribund assets offers a way for investors to enter the market and add value.”

JLL notes in its report that Vietnam’s large cities, especially Hanoi and Ho Chi Minh City, are filled with historic buildings and tiny alleyways where small businesses and many residents reside. 

This plethora of older buildings creates distinct market segments for commercial real estate. When it comes to retail real estate, older people focus on street-front and high-visibility real estate, while younger people are setting up their retail shops in low-key properties that are usually older buildings. 

Both Hanoi and HCMC are seeing millennials invest in older properties, and both cities have seen a resurgence in the use of older historic building, many of which might have been replaced by new buildings.

The trend of using older buildings for new uses can also be seen with non-retail business, such as co-work spaces investing and transforming older buildings. One of the co-work space companies, Toong, has become well known for taking over and transforming old and under utilized building into contemporary co-work spaces. 

There are also a variety of entrepreneur and start-up companies who need an office presence, but who can’t afford Grade A building space. For many of these companies, older, sometimes forgotten properties that can be modified and upgraded for their needs are new options for them. 

Walters from JLL says, “The most suitable buildings for adaptive reuse are those which are well-positioned, even if the site is not suited to the current use. Finding assets with ‘good bones’ and a layout which can be easily adapted to new use is also important.”

She adds that, “City authorities are likely to be amenable to plans which bring life, people and employment back to a building or a district.”

JLL also notes some important considerations for investors and companies thinking of moving into older buildings:

• Safety should also be a major consideration for businesses considering older properties

• Many historic properties are in disrepair and have construction, electric and structural problems, operate without building management boards and have few safety regulations

• Companies and individuals thinking of investing in older real estate properties should be cautious and use experts to evaluate the properties and understand any related issues

JLL”s report concludes with these final notes … the trend of investing and using older properties for both retail and non-retail businesses is here to stay, and investors prepared to think creatively could acquire such buildings while price are still reasonable.