5G opportunities for Commercial Real Estate in Vietnam

5G offers exciting possibilities for both businesses and consumers and is expected to offer speeds 20 times faster than 4G LTE (or 4.5G). A recent trial in Australia between Optus and Huawei reached an impressive speed of 35 Gb/s. Such speeds will be embraced by existing markets such as streaming services and the consumers, but will also facilitate industries previously disadvantaged due to technological restraints such as AR/VR, and those not yet imagined.

Besides the impressive speed, another critical feature is increased connectivity; one million devices per square metre can connect to a 5G network. This increased connectivity has the most potential for future technologies - IoT is set to be the big winner. In a future where sensors, devices and kitchen appliances communicate, monitor and make decisions for us, connectivity is essential. Because of this, 5G will significantly advance the fields of autonomous vehicles, smart grids, smart industries (agriculture, manufacturing, transport & health), and automation, bringing more benefits than any of the previous generations of cellular networks.

Significant investment is required to develop cell towers, fibre cables and more spectrum broadband, particularly in regional areas as this will expand coverage to outside metropolitan areas. Return on investment is not guaranteed, which has stalled progress.

A 5G signal cannot reach long distances like previous generations, meaning denser coverage is needed, which offers new prospects for commercial real estate. Companies offering 5G will be required to lease space for the many small cell tower boosters required for the new network, on rooftops and other outdoor locations. There will also be a demand to ensure that buildings are equipped with 5G equipment so that occupants can effectively utilise the network throughout the building.

Some REITs are making substantial gains from leasing their own towers and fiber cables to service providers, effectively acting as ‘telecom landlords’. American Tower is one such company and has constructed 170,000 cell towers in both the US and abroad, with returns exceeding 20% for the past 10 years.

Unlike the previous generations of cellular networks, Vietnam is committed to being an early adopter of 5G. The Vietnamese government has long-term plans to expand the digital economy, encourage IoT development, and prepare for Industry 4.0.

Three trials are underway in Vietnam, all are due to be finalized in early 2020. Viettel is ahead of Mobifone and VNPT and is expected to commence commercial operations early next year. The pilot program had a successful trial period and managed to reach download speeds of 1.7 Gb/s, but comes up short compared to trials in other countries.

A report by AtKearney found that consumers may not be willing to pay more for a premium product. Industries who are expected to benefit the most, such as IoT and autonomous cars run the risk of under development. As a result, it might be a while before Vietnam is able to gain significant value from a 5G network, even if it is one of the first countries to implement the technology.