Foreign companies have to make a variety of critical decision when entering the Vietnam market, one of which is the choice of an office location. An office is more than a workspace. It is the company’s official address, it makes the office address it operationally supports and it commercially assists in the company’s corporate image. Businesses have plenty of options, e.g. virtual offices, coworking spaces, as well as serviced and traditional offices. The right choice depends on the business model, size of the employee complement, financial resources, as well as the expected business growth.
This document evaluates the office options for foreigners in Vietnam, juxtaposes the core business locations, sets out the office registration requirements, and gives pragmatic considerations for foreigners to decide on the right office for their business.
Why Choose Vietnam for Your Office
Vietnam is the first choice as a manufacturing hub for most foreign businesses looking to locate in Southeast Asia. However, Vietnam is increasingly becoming a preferred business location for managing regional operations, sales, and marketing, as well as for customer support and business development. Vietnam’s strategically favorable location, competitive business costs, and an increasingly available stock of modern office facilities, has also contributed to the construction of company facilities with a regional focus.
Vietnam is also at the middle of the ASEAN region, which offers relatively easy access to other regional business hubs of Singapore, Bangkok, Kuala Lumpur, Hong Kong, and Southern China. This also allows business operations across multiple jurisdictions at a lower cost compared to those operating in the neighboring business hubs.
There’s an additional benefit when it comes to costs. Price comparison on office rentals in Vietnam vs Singapore shows significant advantages for Vietnam, and office rentals in Vietnam are comparatively lower than Grade A office rentals in Bangkok. Coupled with reasonably priced labor, this allows businesses to set up operational offices with a presence in the region without incurring the usual high additional costs and labor for running a full-fledged commercial operation.
The rapid growth of Vietnam’s office market in the past decade further works in Vietnam’s favor, with buildings that provide International Grade office space, the ability to provide business support on a global scale from Vietnam and the provision of professional services from the private business sector.
Focusing on the newer Grade A office buildings in Ho Chi Minh City and Hanoi, there is a greater emphasis on Eco friendly sustainable offices, with increasing use of building materials certified as being green, with the buildings themselves designed to meet LEED standards.
For many overseas investors, the initial location decision has only two options: Vietnam’s two largest business centers.
Ho Chi Minh City has a large concentration of International Corporations and is Vietnam’s commercial and financial business center. There are numerous sourcing, trade, retail and logistics businesses and professional service firms and makes Ho Chi Minh City the preferred business location for international trade and all types of business that have a global focus.
In contrast, Hanoi is Vietnam’s political and administrative business center. It is often the office location of choice for businesses that have direct engagement with Government, or Public and State owned businesses that have a focus on the Northern Provinces of Vietnam’s industry and concerning the support of public infrastructure and services.
The decision to locate in Hanoi or Ho Chi Minh City, should focus on the best location for your clients and supply chain.
Types of Office Solutions Available to Foreign Businesses
One of the first things foreign companies have to figure out when they come to Vietnam is how to set up operations. There isn’t a one-size-fits-all model for office solutions. The company’s size, budget, and stage of growth all play a part in finding an office solution. For some companies, the market must be tested before a permanent headquarters is established. For others, a permanent office solution is required from day one.
Virtual Office
Virtual offices give companies registered business addresses without the need for dedicated office space leases. Mail, calls, and meetings may be provided by virtual office companies on an as needed (on demand) basis.
For companies with foreign representative offices, a virtual office is one of the least expensive ways to get an address and presence in the country without the pressure of high fixed costs. Support, location, and other factors determine the cost, but a typical monthly price is in the range of $50 -200.
Companies should check that the office is compliant with all the requirements for the address of registered business.
Virtual offices are optimal solutions for companies that need registered addresses and formal business contact info, but are not ready to lease permanent spaces.
Coworking Spaces and Serviced Offices
For many SMEs and newly established foreign companies, coworking spaces and serviced offices are an excellent compromise of flexibility and professionalism.
Coworking spaces are formalized communities around a shared work environment. They are flexible membership-based spaces and are designed to be most useful to small teams and remote employees. They are highly amenable to informal businesses. These spaces include high-speed internet, meeting rooms, reception services, and other office amenities but do not bind members to a lease of any length.
Serviced offices are more private but still leave a reduced footprint. Businesses that lease these offices get fully furnished and equipped offices that include reception and cleaning services as well as meeting rooms and IT infrastructure. These amenities all come bundled in one monthly fee. This reduces the leasing office infrastructure burden on the business.
Many of the major cities in Vietnam have a decent selection of international and local operators, such as Regus, IWG, WeWork, Dreamplex, Toong, and UP Coworking, and provide options at various price points and locations.
Serviced offices tend to be flexible enough, especially for companies that are still determining their long-term requirements for office space, to accommodate the evolution of the business, including expansions and contractions.
Lease Office Space
More established businesses with larger teams typically move to leased office space.
Cost of renting varies with the city, the quality of the building, and the building’s location. In the Ho Chi Minh City’s central business district, Grade A office space costs between USD 45–70 per square meter, with Grade B offices between USD 20–35. A similar structure exists in Hanoi, where office rental costs are also set by building location and quality.
Businesses must analyze the complete lease agreement before signing a lease. The right to increase rents, the right to renew the lease, who is responsible for paying the fit-out costs, service charges, and costs associated with early termination are all lease agreement terms with commercial implications. The better the understanding of these terms, the less likely there are to be negative commercial implications for the business when it scales.
For those businesses interested in establishing themselves in Vietnam for the long term, leasing an office is the most commercially viable option once the business has scaled to the level where the office fit-out and facilities meet the business’s requirements.
Selecting the Right Business District
When selecting an office location, the central business district you select can impact your businesses costs and customer, employee, and supplier access. For most foreign businesses, the choice is between Ho Chi Minh City and Hanoi. Each of these two cities has distinctive offerings based on your business’s requirements and your industry.
Ho Chi Minh City
Ho Chi Minh City is Vietnam’s largest business city. It is the business city of choice for most multinationals, start-ups, and businesses with a focus on exporting. The city generates 23.5% of Vietnam’s GDP and has the highest Foreign Direct Investment.
Several HCMC districts have developed into major business zones.
District 1 (CBD) is the most prestigious business and financial center of HCMC. Numerous international banks and professional service firms have established their offices there. Grade A office buildings in District 1 host the headquarters of most multinational corporations. District 1 is ideal for businesses wanting a prestigious office location who value proximity to clients and business partners.
Office rents are relatively lower outside the CBD, while the location remains central. District 3 is home to a number of consulting firms and technology companies. Small to medium enterprises value the balance between accessibility and cost that District 3 provides.
District 7 (Phu My Hung) is an international business community that hosts a concentration of Korean, Japanese and Taiwanese firms. This district contains logistics and manufacturing firms that serve the Southern industrial zones, and also has modern residential and international schools catering to the needs of expatriate staff.
Thu Duc City has consolidated itself as an innovation center of Vietnam. Advanced, high-tech manufacturing is integrated with research institutions and universities. Companies in the fields of manufacturing, engineering, and software view Thur Duc City as a viable and strategic choice for future growth.
HCMC is often the location of choice for businesses in retail, logistics and consumer goods.
Hanoi and Da Nang
Hanoi, as the political and administrative capital of Vietnam, is HCMC’s closest competitor in servicing state-owned enterprises. It houses the ministries, regulatory agencies, diplomacy missions and public-sector project offices. Businesses that engage in public-sector projects, education and infrastructure in the northern industrial provinces will find Hanoi a more strategic location than HCMC.
International organizations, financial institutions, law firms, and companies with needs for direct contact with government in Vietnam prefer the locations of the business centers of Hoan Kiem and Ba Dinh.
Cau Giay and My Dinh have become the new business centers for technology firms in Vietnam, housing modern office developments, and multinationals and major technology companies located near major universities.
To the north, Da Nang is developing as a new business center. Even though Da Nang’s office market is much smaller than Ho Chi Minh City’s and Hanoi’s, it is enjoying a growing concern for investment in IT, BPO, tourism, and digital services. Da Nang offers a cost advantage for business interests that are more concerned about the costs of running their business than the closeness to the largest markets of Vietnam.
The most important factor in determining an office location is proximity to your clients, employees, and business partners. Foreign investors should focus more on the location that will best achieve their business interests in the long term rather than the largest market.
Legal Requirements for Office Registration in Vietnam
After selecting an office solution and an office location, the next step is to make sure the location meets the legal requirements for the company to be registered in Vietnam. This is a more or less simple process, but selecting the wrong address and failing to omit critical terms of the lease can significantly delay the registration process and cause other problems.
Using an Office Address for Business Registration
An official business address must be registered for every new business in Vietnam. This is noted on the Enterprise Registration Certificate (ERC). The address given will be the legal, tax, and official correspondence address for the business.
For foreign-invested enterprises, the Registered Office must reflect the actual business office of the enterprise. Depending on the business enterprise, authorities may ask for a signed lease as evidence, and/or proof that enterprise activities may be carried out in the location.
Firms should also make sure that the planned location of the office meets the local zoning and licensing requirements. For example, some residential addresses may not qualify for business registration, especially if there is a zoning restriction on the business enterprise. Choosing the correct office location helps avoid unnecessary changes after the business is registered.
Office Lease Agreements
For businesses leasing office spaces, the lease is more than a commercial contract. It becomes part of the business registration, and may affect the cost of doing business.
Foreign leasers must pay special attention to key lease terms. The lease must detail the length of the lease, the terms for lease renewal, and the terms for the lease to be reinstated, the security deposit, and the leased space fit. It is also important to understand the total cost of the leased space.
Companies considering future growth opportunities should examine provisions related to assignments, subleases, and early termination. These provisions can afford necessary flexibility and adapt to evolving business requirements.
While negotiations focus on price, careful consideration of a lease’s terms can avoid additional expense and help ensure the lease meets the company’s needs throughout the term.
Conclusion
Establishing an office in Vietnam is more than acquiring office space. It is a decision with consequences for the effectiveness of business operations, compliance with applicable laws, employee satisfaction, and growth of the business. The appropriate solution varies based on the company’s stage. Is the company entering the market for the first time? Is the company building a regional presence? Is the company establishing a long-term presence?
By assessing the options available in the market, selecting an appropriate location for the business and an office that meets Vietnam’s requirements for registration, foreign companies can create a solid operational base. The right planning on this front will eliminate waste and reduce time to market, all while creating a foundation for the company to grow.