Knowledge Hub Vietnam
Office: Potential Locations
Latest Update: April 14, 2022
This is relevant for: Companies looking to establish an office in Vietnam
Most companies opening are those engaging into sales or sourcing activities. Another group of yet-to-be office occupiers approaching us are companies planning ITO and R&D activities. Because Vietnam does not just have one economic center but several bigger cities rivalling each other, finding an office location needs some consideration.
🌃 The Largest Vietnamese Cities
Above-mentioned companies will typically settle in a city. For sales and sourcing companies, cities and their industrialized surroundings constitute crucial markets. For ITO and R&D companies, urban centers provide massive number of talents. Also, cities offer better access to infrastructure (e.g. internet speed) and mostly have more experienced administrative units. Additionally, and sometimes critically, it is easier for foreigner to live in cities than in rural areas. Only here, they will find high-level accommodation, entertainment, a developed health system as well as international schools.
For the purpose of this article, we will divide Vietnamese cities into two tiers:
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Tier 1: Population of more than 1 million and international airport within same province/city
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Tier 2: Population of more than 250,000 and domestic airport within same province
As a result, we come up with a selection of eleven municipalities.
Overview: Tier 1 and 2 cities in Vietnam
*Blue label: Tier 1 city, green label: Tier 2 city
Accordingly, tier 1 cities are:
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Ho Chi Minh City (HCMC): Economic powerhouse
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Hanoi: Capital city
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Haiphong: Port town in northern Vietnam
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Da Nang: Tourism and service hub
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Can Tho: The “door to the Mekong Delta”
Tier 2 cities are the coastal towns of Vinh, Hue, Quy Nhon and Nha Trang. Da Lat and Buon Ma Thuot in the Central Highland also qualify for this category.
When establishing offices in Vietnamese cities, companies should choose a district with a highly perceived status. By displaying an address in these locations or inviting partners here, a company can improve its "street cred" as a centrally located office implies success and trustworthiness. For example, in HCMC, district 1 would be the most prestigious part of town and in Hanoi Ba Dinh or Hai Ba Trung carry a "big name".
🏢 Office Location for Sales and Sourcing Companies
The "shortlist" of potential locations for these companies typically consists of two cities: Hanoi and HCMC.
A whopping 70% of the German sales and service companies are located in HCMC 🤯. This is because the city and the adjacent provinces make up the largest urban agglomeration in Vietnam with over 15 million inhabitants. Furthermore, the Greater HCMC Region has the highest GDP/capita with USD 4.6k. And finally, the region's share in Vietnamese GDP is roughly 50%. Hence, most foreign companies will start their sales operations here. Same is true for sourcing because most factories are also located in the Greater HCMC Region.
Another quarter of German sales offices has been established in Hanoi. The city is of special interest for companies dealing with the many state-owned enterprises and other public authorities in the capital city. Furthermore, northern Vietnam is also an important industrial location making Hanoi attractive as a sales and sourcing base for the region.
👩💻 Office Location for ITO/R&D Companies
Generally, all of the above-mentioned Tier 1 and 2 cities may be of interest for these firms.
In fact, most German investors in ITO and R&D have moved into HCMC. 70% of the programming and post-processing companies are located here. HCMC is offering by far the biggest international investor community as well as amenities for foreign employees and of course lots of (increasingly expensive) talent.
Some other German companies have ventured into Da Nang in Central Vietnam and to Hanoi. The former offers competitive salaries while the latter one might be an attractive alternative to HCMC.
Overview: Number of German ITO investors in Vietnam by city
