Education and Its Link to Commercial Real Estate Performance

Globally, there is a correlation between high-ranking universities and demand for commercial real estate. This is no surprise as businesses want the best brains working for them. Does this correlation exist in Viet Nam, and is there potential to foster innovative tech honeypots in decentralised areas like Thu Duc in Ho Chi Minh City or Ecopark in Hung Yen?

Education Overview in Viet Nam

Education is deeply engrained in the Vietnamese psyche. Ho Chi Minh believed that “an ignorant nation is a weak nation” and that eradicating illiteracy was fundamental to establishing Viet Nam as a strong state. Today, Viet Nam is one of the few developing nations where education has consistently improved since the 1960s, and The Economist recently called Viet Nam’s schooling system ‘one of the best in the world’.  

Government expenditure on education and training rose by 4% per year between 2017 and 2022. In 2021, education received US$10.8 billion, equivalent to 13.5% of the State Budget. Private education is on the rise, and between 2018 and the end of 2022, international and bilingual schools in Ha Noi rose by 4%, 2% in Ho Chi Minh City and 6% in Binh Duong. 

In the 2021-2022 academic year, Viet Nam had 242 Higher Education Institutions (HEIs), comprising 176 public, 66 private institutions, and five foreign. While there are only five foreign campuses, there are approximately 410 joint training programs between Vietnamese HEIs and foreign HEIs and 103 transactional education (TNE) programs. With TNE programs, students study in Viet Nam but earn degrees from the university’s home country.  

Vietnamese students at international schools will continue to increase as the middle class grows and incomes rise. Many parents perceive that international schools, programs and universities offer their children the best education opportunities.  

While Viet Nam’s educational base is solid, it is yet to exploit its tertiary opportunities to the fullest. Can Ho Chi Minh, Ha Noi, or even Da Nang capitalise on the synergy between education and the knowledge economy prevalent in cities like Tokyo, London, Cambridge, Boston, and San Francisco?

How Universities Influence Office Rent

There are approximately 236 million students in higher education globally, 136% more than at the start of the millennium; Asia now has seven times more students than North America, and enrolled students have increased by 237% since 2000. UNESCO forecasts 594 million tertiary students by 2040. Like the demand for tertiary education, specialist tech sectors like AI, ClimateTech, Deep Tech and CleanTech are also exploding. Businesses want to be where mighty brains congregate. Whether that is through direct links to universities or by recruiting the most skilled graduates, there is a synergy between education and the knowledge economy. This has resulted in high demand for premium offices and laboratories close to leading universities. Increasingly, there are links between a city’s university rankings and the demand for, and value of, its commercial real estate. 

Analysis of office capital values in top global cities shows that those that have a QS Top 200 university have higher capital values (US$672 per sq ft on average) than those that do not (US$425 per sq ft). The distribution of cities with higher capital values is strongly skewed to those that are also home to top ranked institutions. 

None of Viet Nam’s national universities placed in the top 200 in QS World University Rankings 2024. Duy Tan University in Da Nang was the highest ranked national university in Viet Nam at 514th, and Ton Duc Thang University in Ho Chi Minh City followed at 721st. Viet Nam National University Ho Chi Minh City (VNU-HCM), Viet Nam National University Ha Noi, and Ha Noi University of Science and Technology ranked between 951st and 1,400th. However, HCMC and Ha Noi are home to international branches of Royal Melbourne Institute of Technology (RMIT), a renowned university from Australia; RMIT ranked 140th on the QS World Ranking for 2024.  

Ha Noi and Ho Chi Minh City have historically had the highest rent in the country. In Q2/2023, office rent in Ha Noi averaged US$21/m2/month and US$32/m2/month in Ho Chi Minh City. Despite having the highest-ranking national university, an RMIT English language centre and the title of Viet Nam’s Silicon Valley, Da Nang office rent was significantly lower at US$13.6/m2/month in Q3/2022.

Download the report of Da Nang Spotlight 2023 here

Businesses in search of top talent have a balancing act to perform. The cost of hiring and retaining the best graduates differs depending on location. One of Viet Nam’s leading FDI draws is its affordable labour force, however, the country is aware that it must increase the overall skill level in the country. The Government development plan until 2030 plans to reform the education system to improve quality and access.  

In 2022, 26.4% of the labour force aged 15 years and over was trained*, rising from 26.1% in 2021. Although 62.8% of Viet Nam’s labour force is concentrated in rural areas, most trained workers are urban residents. 

Global Comparisons

The UK, Europe, and the US have long-established education institutions and very clear correlations between office premiums and university rankings. In Boston, Harvard and MIT talent has historically kept lab space at a premium, and occupancy sits at approximately 95%. London’s King’s Cross redevelopment was anchored by an education tenant. Oxford and Cambridge illustrate how the scientific excellence honed in their universities gives rise to significant tech clusters. The University of Cambridge alone contributes £30 billion a year to the UK economy and supports 86,000 jobs through its research and commercial activities.

China has invested heavily in its universities, and Beijing and Hong Kong now London closely with a significant number of QS top 100 universities. China's notable resource and infrastructure investment in its higher-education sector has resulted in an 824% growth in university and college enrolment since 1997. Between 2017 and 2022, China’s science research output increased by 107%, which has supported the growth of a tech ecosystem that is changing Chinese cities.

With globalisation comes mobilisation and while China’s domestic student population has risen notably, Chinese students attending overseas universities have increased by 509% between 2006 and 2021. In the 2019-2020 academic year, 190,000 Vietnamese students were studying abroad according to the Ministry of Education and Training (MoET). While this might suggest threats of brain drain, Viet Nam’s brain drain threat has decreased notably between 2006 and 2022. According to the Fragile States Index, Viet Nam’s score on the brain drain index dropped from 5.3 in 2021 to 3.6 in 2022, however, it still scores higher than regional peers like Singapore (1.1) and Malaysia (3.2). 

Education Opportunities in Viet Nam

Given that Viet Nam had 17.9 million school students in the 2021-2022 academic year and the country’s ambition to become a high-tech, innovation hub, there is significant potential for university development and the emergence of real tech hubs. With decentralisation on the rise across real estate segments in Viet Nam where could potential tech hubs emerge and is there room for “fringe to honeypot” experiences?  

Tech hubs have a proven track record of beginning in relatively fringe locations, such as Shoreditch in London or Brooklyn in New York. However, these areas are often victims of their success, as prices rise, and long-established local enterprises move out to more affordable areas. These hubs are also deeply engrained within the local community, and these innovation ecosystems rarely thrive if they exist in isolation.  

See further: Education Investment in Viet Nam – Is Private the Way Forward?

Fringe developments with honeypot potential include Saigon Hi-Tech Park (SHTP) in District 9 in Ho Chi Minh City and Ecopark in Hung Yen.

SHTP is a 913-ha development positioned as a future technopolis that will build the technological and intellectual base in Viet Nam, essentially a tech hub that drives technological innovation, intellectual capital development and an innovation economy. However, Nguyen Tat Thanh University’s (NTTU) research, ICT, automation, robot, and energy labs spanning 4.5 ha and based at SHTP are yet to come to fruition. This said, residential development is on the rise in decentralised areas, and SHTP is only 10 minutes from one of the largest mega-developments in the city, Vinhomes Grand Park. The synergy between notable research labs and established communities is essential, and this could be a route to future success.  

Ecopark in Hung Yen is a 500-ha mega-development that will be home to 110,000 residents by 2030. Its comprehensive land use planning means that the township delivers diverse amenities that support sustainable development and community integration. It is 30 minutes from the Ha Noi CBD and is a pioneering, sustainable, mixed-use township in Viet Nam with schools, residential and commercial products, transport systems, sports facilities, and green spaces. It is home to British University Vietnam (BUV), Viet Nam's only international university that offers accredited British degrees from renowned institutions such as the University of London and Staffordshire University. Upon completion, the three-phase campus at Ecopark would have received an investment of US$100 million and will have a capacity for 7,000 students. It has four schools, including the School of Computing and Innovative Technologies. BUV is already engrained within the local community and presents notable opportunities for research and commercial development.  

If Viet Nam is to uphold its innovation goals, it must nurture and incentivise “honeypot” districts. There are incentives for foreign education investors such as a four-year CIT exemption with a -50% CIT reduction for five years. However, education facilities necessitate notable capital investments. According to Decree No.86/2018/ND-CP, the minimum investment capital for higher education institutions is VND 1 trillion (excluding land costs) and VND 250 billion (excluding land costs) for a branch of a foreign-invested higher education institution.  

Perhaps, Viet Nam could adopt China’s approach, where universities are often designed with a particular economic, business, or political objective in mind, according to James Macdonald, Senior Director and Head of Research at Savills China. For example, many of China’s top universities are in Beijing, as such, it is an R&D hub for artificial intelligence, robotics, and biotechnology.  

Conclusion

Demands for high-quality education and skilled labour in Viet Nam are only going to increase as the country’s knowledge economy, middle class, and innovation ambitions grow. There is certainly room for investors looking to capitalise, be it in tertiary education facilities or tech businesses wanting to position themselves close to universities in decentralised communities with future education and human resource pools.

Contact Giang Huynh at Savills Advisory Services to learn more about education opportunities in Viet Nam.

*Note: Trained labour force: 
The trained labour force comprises those who satisfy both of the following conditions:
- Be employed or unemployed.
- Have been trained for 3 months or more in a training institution or an establishment whose responsibility is to train under the National Education System. Individuals must have graduated or been granted the degree/certificate. Courses include short-term training, vocational secondary school, vocational college, professional secondary school, college, university, and post-graduate (master, doctor, and science doctorate).