In an increasingly tight real estate market, more and more investors are finding value in adapting obsolete buildings, according to JLL Vietnam.
Photo: JLL Vietnam
The pace of technological and social change around the world means more and more buildings are becoming obsolescent as consumer needs and demands shift.
In between the glossy new developments and protected historic buildings are many older, redundant buildings. Thoughtful reuse of these moribund assets offers a way for investors to enter the market and add value, according to Dr. Megan Walters, JLL’s Head of Asia Pacific Research. “Obsolescent buildings might be wrong for their current use, but might also be adaptable to something more suitable,” she said.
Thanks to its past, Vietnam’s major cities are filled with historic buildings and tiny alleyways that lead to more tiny alleyways. While the older generation used to line up for an opportunity to secure street-front real estate for retail purposes, young people are more into low-key properties. Both Hanoi and Ho Chi Minh City are seeing a resurgence of historic buildings that would have been replaced by more modern properties by now, if not for millennials.
The focus on the old is not new. Long-standing apartment buildings and mansions on main streets like Ton That Thiep and Nguyen Hue in Ho Chi Minh City have been enjoying steady traffic for many years thanks to charming coffee shops, cool bars, and hip clothing brands. Hanoi, on the other hand, has always been famous for its Old Quarter, where the past and present meet to bring about great business. What used to be shops of artisans and traders are now also home to concept stores, hostels, and restaurants, bustling with tourists and youngsters.
Non-retail businesses are not staying out of the retro wave. Toong is known for transforming many old, underutilized buildings into contemporary coworking spaces, bringing modernity and tradition into the workplace. Forgotten properties around the city are now busy again thanks to the presence of startup companies with a young and hip workforce. But not any old building can be resurrected successfully.
“The most suitable buildings for adaptive reuse are those that are well-positioned, even if the site is not suited to the current use,” said Dr. Walters. “Finding assets with ‘good bones’ and a layout that can be easily adapted to new use is also important. City authorities are likely to be amenable to plans that bring life, people and employment back to a building or a district.”
Safety should also be a major consideration for businesses considering this type of property. Many historic properties are in various stages of disrepair and suffer from pest, mold, and damp walls. The absence of building management boards and any fire safety regulations put these properties at great risk. Caution should be taken before investing and make sure you are aware of not just the building’s advantages but also its issues.
Regardless, the trend is here to stay, for both retail and non-retail businesses. Investors prepared to think creatively can acquire such buildings while the price is still reasonable.