Vietnam to embrace offshoring opportunities
Xem Tiếng Việt 
Amid a challenging business environment which sees a reduction in sentiment among corporate real estate leaders, the Asia-Pacific offshoring market is forecast to more than double to USD 185.1 billion by 2032. This growth is expected to drive an additional office demand of between 4.7 and 5 million square metres per year for the next three years. This insight is drawn from Knight Frank’s Asia-Pacific Horizon: Harnessing the Potential of Offshoring, which studies the essential factors that define the region’s appeal as the best location for offshore services and sheds light on the significant changes in the industry.
Resilience and appeal of Asian offices
Global companies increasingly seek cost-effective solutions to minimise expenses, and a growing number are now looking towards offshoring functions as a strategic avenue. Within the region, these markets offer the best offshoring locations around the world.
India:
- Employs nearly 4.1 million people in India.
- The offshoring industry accounts for nearly 60% of overall service exports in 2023.
- The industry’s service exports have grown threefold from USD 63 billion in 2013 to USD 185.5 billion in 2023.
- India is expected to achieve the one billion square feet mark in office stock by 2025, mainly catapulted by GCCs.
Philippines:
- Projected to represent roughly 10%-15% of the global offshoring market.
- An estimated 1.6 million Filipinos are employed across more than 1,000 offshoring firms.
- Accounts for 6.0% of GDP.
Malaysia:
- Ranked 3rd best global outsourcing location consecutively since 2004*
- Offers an estimate of more than 8% share of the Asia-Pacific offshoring market.
- Strong government support to develop digital skills.
Vietnam:
- Offshoring market revenue is expected to reach USD 0.84 billion with a 2024–2028 CAGR of 8.78%, according to Statista.
- Ranked 7th best global outsourcing location*
- The presence of major technology firms positions the country as a global digital hub, 82% of key players consisting of SMEs.
*2023 Kearney Global Services Location Index
Christine Li, head of research, Asia-Pacific, Knight Frank says: “Offshoring has emerged as a critical driver propelling office demand in these four hubs as they steadily expanded their footprint. We anticipate the potential cost savings to encourage offshoring activities. We have already observed this in India. From 2022 to 2023, leasing transactions involving Global Compatibility Centre’s (GCC) proportion increased by 10%, accounting for 35% of the total market share. This trend was similarly observed in the other three key markets, the Philippines, Malaysia, and Vietnam where offshoring is playing an increasingly significant role in driving demand for office spaces.”
Vietnam is a popular choice for Business Process Outsourcing (BPO), especially in IT, given the industry’s skilled workforce that trails only India’s. Vietnam offers the most value for business costs, particularly in labour. This is further bolstered by a positive outlook for occupiers for real estate costs, which can make up 10 – 15% of operational expenses. Office rents in Indian cities are expected to overtake Ho Chi Minh City (HCMC) in the next three years. With an ample pipeline stemming from the establishment of HCMC’s alternative business district in Thu Duc City, rents are expected to decline by over 20% by 2026.
| Top Three Trends/Drivers: |
| Cost-Effective Labour Force Vietnam’s cost-effective labour force is a key attraction for outsourcing, as lower labour expenses in Vietnam, compared with Western countries and Asian peers, appeal to businesses seeking quality services at competitive rates. A notable trend in Vietnam’s offshoring market is the move towards higher-value services such as software development and research and development. |
| Skilled Workforce and Language Proficiency 96.1% of the total population is literate, with a ranking of 58th out of 113 countries and territories, placing Vietnam 7th in Asia for the Global English Proficiency Index 2023. A.T. Kearney also ranked Vietnam 7th in its Global Services Location Index (GSLI) as a robust outsourcing destination. |
| Ongoing Infrastructure Development Ongoing infrastructure development in information technology and telecommunications is notable, with the government making investments to enhance internet connectivity, data centres, and technological infrastructure, ensuring reliable and high-speed communication networks for offshoring companies. |
Vietnam’s BPO market saw an estimated USD 0.53 billion in revenue in 2023, with a 2016–2023 CAGR of 12.7%, according to Statista. Demand for outsourced services like customer support, data entry, and software development has surged in Vietnam. With its strategic location near key markets like China and Japan, proficient workforce, and cost-effective services, Vietnam is an attractive choice for businesses seeking outsourcing solutions.
A distinctive feature of Vietnam’s BPO market lies in its abundance of small and medium-sized enterprises (SMEs). These businesses often concentrate on specific niches, such as gaming or e-commerce, enabling them to deliver customised solutions to their clients. Vietnam’s BPO market is fragmented in terms of both industry sectors and company sizes, with 82% of key players consisting of SMEs. The IT sector occupies entire buildings concentrated in tax-incentivised hi-tech parks, while Back-office and Customer Service are primarily in Grade C and B office buildings.
Vietnam’s BPO market will continue to benefit from strong macroeconomic factors, such as a sizable, youthful workforce and an expanding middle class. Government initiatives to foster economic growth and attract foreign investments will be a further boon. Vietnam’s strategic geographical positioning and conducive business environment position it as an appealing destination for companies seeking to expand their operations.
