What is TOD and Compact Cities: A Strategic Guide for Real Estate Investors

As Viet Nam expands its Metro network and invests in urban transport infrastructure, Transit-Oriented Development (TOD) is becoming an increasingly important component of city planning. By concentrating higher-density development around public transport hubs, TOD aims to improve connectivity, support more efficient land use and create integrated urban communities. 

Closely linked to this approach is the concept of the compact city, which promotes development patterns that bring housing, employment, services and amenities closer together. This article explains the principles of TOD and compact city planning, while explaining the factors investors should consider when evaluating real estate opportunities linked to transport infrastructure and long-term urban development.  

Mục Lục 1. What Is TOD And How Does It Work? 2. What Is A Compact City? 3. How Is TOD Being Planned In Viet Nam? 3.1 Ha Noi TOD Planning: A Polycentric And Regional Network 3.2 HCMC TOD Planning: Five Important Areas Along Metro Line 2 4. Investing In TOD Real Estate: Opportunities And Risks 4.1 Transport Accessibility 4.2 Commercial Potential And The Passenger Footfall Paradox 4.3 Practical Planning For Mixed-Use Compact Developments 4.4 Asset Valuation And The Cost Of Capital During The Waiting Period 5. How To Assess Potential TOD 6. Mitigating Investment Risks Conclusion Frequently Asked Questions

1. What Is TOD and How Does It Work?

TOD is an urban planning and development model centred around public transport. It integrates residential, office, retail, services and public spaces with transport networks, while making it easier for people to walk, cycle and use public transport in their daily activities. 

According to the Institute for Transportation and Development Policy (ITDP), the objective of TOD is to shorten travel times, reduce reliance on private vehicles and minimise emissions. Rather than allowing urban development to spread outwards, TOD concentrates population and economic activity around major transport corridors. 

For the model to operate effectively, planning needs to coordinate transport infrastructure, land use and urban design. Metro systems can serve as important transport hubs because of their ability to move large numbers of passengers and connect residential areas with employment, commercial and service centres. 

A city-centre TOD may integrate: 

• Residential properties across different types and price segments; 
• Offices, retail, restaurants and services; 
• Public spaces, parks and pedestrian routes; 
• Bus interchanges, bicycle parking and first- and last-mile connections. 

A radius of 400 to 800 m around a station, equivalent to around five to ten minutes of walking under standard conditions, is commonly used as a reference when studying TOD. 

However, the presence of a metro station does not automatically create a fully functioning TOD area if supporting planning and infrastructure are not developed in an integrated manner. Therefore, beyond the connectivity provided by the metro, development outcomes also depend on how the surrounding urban space is organised, which leads to the concept of compact cities. 

2. What Is a Compact City?   

A compact city is a concentrated development model in which homes, workplaces, services and amenities are located within close proximity to support more efficient land use. 

The model is typically associated with appropriate density, mixed-use development, public transport and access to essential amenities. 

A compact city does not mean simply constructing more high-rise buildings or maximising density. An area with high density but inadequate infrastructure, public spaces and supporting amenities can still place pressure on quality of life. 

A compact urban area can generally be identified through several characteristics: 

• Efficient land use: Urban functions are organised appropriately for local conditions. 
• Mixed-use development: Residential, office, commercial and service uses are integrated. 
• Access to amenities: Residents can access essential needs within a convenient distance. 
• Adequate infrastructure: Transport, public spaces and amenities are planned in line with the size of the population. 

When combined with public transport networks, this model can help connect different functions and improve accessibility for residents. 

Compact City vs TOD 

When applied together, compact city principles help concentrate housing, employment, services and amenities within a defined urban area, while TOD provides the transport framework that connects these activities to public transit networks. 

However, the two concepts are not interchangeable. A high-density urban area is not necessarily a TOD if it lacks strong public transport connectivity. Likewise, the presence of a metro station does not automatically create a compact city if development remains fragmented and urban functions are dispersed. 

3. How Is TOD Being Planned in Viet Nam?

Viet Nam is expanding urban railway networks in its major cities while developing planning frameworks to support land use and development around public transport infrastructure. 

3.1 Ha Noi TOD Planning: A Polycentric and Regional Network 

The amended Capital Law in 2026 gives Ha Noi the greater autonomy in adjusting detailed zoning plans and regulating building density around railway stations. Ha Noi's TOD structure is organised around several strategic areas: 

• Zone 1: Historic Core with transport hubs at the Red River CBD and Hanoi Station, providing financial, heritage and creative functions; connected to Metro Lines M1, M2, M3, M10 and M13. 
• Zone 2: North Thang Long with hubs at Co Loa and Noi Bai, oriented towards MICE, aviation and Freezone functions; connected to Lines M2, M5, M6, M10 and M13. 
• Zone 3: Eastern Tien with hubs at Co Bi, Phu Thi and Yen Vien, with logistics and semiconductor functions; served by Lines M1, M4, M5, M8 and M9. 
• Zone 4: Phu Xuyen Logistics Hub and Smart Farm, linked to the North-South railway corridor and Ring Road 4. 
• Zone 5: Van Dinh and Olympic with hubs at Van Dinh and Olympic City, focused on high-end leisure and sports; connected to Line M10. 
• Zone 6: Xuan Mai Edu-Med Hub, focused on higher education and regional healthcare; connected to Line M8. 
• Zone 7: Hoa Lac Innovation Engine Hub, focused on R&D, semiconductors and specialist residential development; connected to Line M8. 
• Zone 8: Son Tay - Ba Vi specific to Son Tay Heritage and Ba Vi Resorts, focused on heritage conservation and eco-resort development; connected to Line M8. 
• Zones 9 and 10: Ring Corridors working as a chain of areas along Ring Roads 4 and 5, following the 15-min city and ecological development models; connected to Line M14. 

3.2 HCMC TOD Planning: Five Important Areas Along Metro Line 2 

In HCMC, the special mechanism established under Resolution 98/2023/QH15 allows the city to pilot land acquisition and land auctions around stations. 

In June 2026, the municipal authorities approved TOD boundaries covering 940 ha across five areas along Metro Line 2 (Ben Thanh - Tham Luong): 

• Area 1, Ben Thanh Station, Tao Dan, 188.57 ha: This central area is bounded by Truong Dinh Street, the Saigon River, Nguyen Dinh Chieu Street and Nguyen Cu Trinh Street. 
• Area 2, Dan Chu, Hoa Hung, Le Thi Rieng, Pham Van Hai and Bay Hien stations, 265.07 ha: A connectivity corridor bounded by Hoang Van Thu Street, Nhieu Loc Canal, To Hien Thanh Street and Cach Mang Thang Tam Street. 
• Area 3, Nguyen Hong Dao Station, 43.81 ha: The Bau Cat residential area bounded by Cong Hoa Street, Truong Chinh Street, Truong Cong Dinh Street and Bau Cat Street. 
• Area 4, Ba Queo, Pham Van Bach and Tay Thanh stations, 148.92 ha: A western logistics gateway near Tan Son Nhat Airport, bounded by Truong Chinh Street, Tay Thanh Street and Tan Ky Tan Quy Street. 
• Area 5, Tham Luong Station and Depot, 292.81 ha: A major depot cluster bounded by Tham Luong Canal, 19/5 Canal, Le Trong Tan Street and Phan Van Hon Street. 

>> Learn more: HCMC metro plan and its impact to the real estate market 

4. Investing in TOD Real Estate: Opportunities and Risks

4.1 Transport Accessibility 

Properties near metro stations can benefit from improved access to major employment centres, broadening their appeal to occupiers who prioritise convenience and connectivity. Over time, this supports rental demand, value and occupancy. 

However, investors should distinguish between proximity and accessibility. A property may be located close to a station but still offer a poor user experience if pedestrian access is limited, crossings are inconvenient, or the surrounding public realm is underdeveloped. Likewise, the benefits of a metro line will depend on service quality and operating frequency. 

As a result, the value of a TOD should be assessed based on actual ease of access rather than distance alone. 

4.2 Commercial Potential and the Passenger Footfall Paradox 

The volume of passengers moving through metro stations each day can create significant potential for retail, shophouses and convenience services. For some projects, this may support revenue generation and improve operating value compared with properties serving residential demand alone. 

However, passenger footfall does not always translate into commercial performance. Most metro users tend to follow established routes and prioritise quick connections between stations and their destinations. Retail spaces located outside these main movement flows, with limited visibility or offerings that do not match everyday consumer needs, may therefore face challenges in attracting and retaining a stable customer base. 

Commercial performance depends not only on passenger volumes, but also on the location of the retail space, spatial design and the fit between the business model and actual user behaviour. 

4.3 Practical Planning for Mixed-Use Compact Developments  

Integrating multiple sectors including offices, residential, and commercial uses can help optimise land use and improve operational efficiency by bringing different user groups together at different times of the day. This approach can also contribute to urban vitality and support demand for commercial and service spaces. 

However, actual performance depends on the level of integration between planning, connectivity infrastructure and project implementation. During urban development, elements such as underground pedestrian links, station entrances and land-use functions may be adjusted to reflect management directions and implementation conditions at different stages. 

As a result, assessing an investment opportunity on initial planning proposals may create a gap between expectations and actual operating potential, particularly when related infrastructure is delivered later than anticipated. 

4.4 Asset Valuation and the Cost of Capital During the Waiting Period 

Greater certainty around planning approvals and visible progress on infrastructure delivery can provide investors with a stronger basis for assessing asset values. As transport projects move closer to completion, improved connectivity may also support property values in surrounding locations. 

However, infrastructure-led investment should be evaluated against both pricing and delivery timelines. In some cases, market expectations may already be reflected in asking prices, limiting the scope for future value growth. Investors should also recognise that major transport projects often progress through multiple construction, testing and approval stages before entering operation, which can affect delivery schedules. 

For leveraged investors, holding costs are an important consideration. Interest expenses and ongoing ownership costs incurred before infrastructure becomes operational can have a material impact on investment performance and the timing of returns. 

5. How To Assess Potential TOD       

To support the initial screening and assessment process, investors can consider the following criteria. 

6. Mitigating Investment Risks     

Investing in real estate associated with public transport infrastructure requires a more comprehensive approach than simply considering proximity to a metro station. Asset value needs to be assessed across multiple dimensions, from planning and infrastructure progress to market demand and long-term operating potential. 

Market Research: A Foundation for Investment Decisions 

Savills Market Research provides data-driven analysis to help clients assess real estate opportunities and risks. For projects linked to public transport infrastructure, analysis typically focuses on: 

• Location analysis: 
  Assessment of demographics, economic activity, transport connectivity, urban development plans and competing projects. 
• Market fundamentals:
  Analysis of existing and future supply, buyer demand, rental demand and market absorption. 
• Product positioning:
  Identification of appropriate product types, development scale and target customer groups. 
• Performance assessment:
  Evaluation of rental potential, occupancy, absorption and competitive positioning. 
• Investment support:
  Independent market insights to inform investment, development and asset repositioning decisions.

Conclusion     

TOD planning and compact city development can support the growth of areas connected to public transport, creating opportunities for residential, office, retail and urban services. However, not every property near a metro station represents an effective TOD investment. 

Asset value also depends on approved planning, infrastructure progress, access to stations, market demand and acquisition costs. Rather than simply following planning announcements, investors should begin by verifying the underlying data, assessing operating potential and developing a financial plan that reflects the intended holding period. 

Frequently Asked Questions 

1. What is the typical TOD proximity to a metro station? 

In urban planning and development practice, a radius of 400 to 800 m from a station is often considered a convenient walking catchment, equivalent to around five to ten minutes of travel under suitable infrastructure conditions. 

However, this is a technical reference range rather than a legal boundary applicable to every project. The official TOD boundary for each area should be determined based on planning documents, approval decisions and regulations issued by the relevant authorities. 

2. How can investors check whether a property falls within a TOD planning boundary?

Investors should cross-check the development's location against official planning maps and documents published by the relevant authorities. 

The review should include the planning boundary, approval status, reference number of the relevant document, date of issuance and any subsequent planning adjustments. The assessment should not rely solely on project marketing materials or geographical distance from a metro station. 

3. Is TOD 5.0 an official planning standard in Viet Nam?

The term TOD 5.0 is currently used in studies, conferences and urban development proposals. However, it should not automatically be regarded as a unified legal standard applicable nationwide. 

When assessing new TOD concepts or models, investors should consider the context in which the term is used, its research basis, the proposing organisation and the specific technical content before drawing conclusions. 

4. What factors affect property values near metro stations? 

In addition to station access, investors should consider factors including the progress and operational effectiveness of the public transport system, connectivity with different urban functions, the quality of urban amenities, owner-occupier and rental demand, competing supply in the area, the project's legal status and the acquisition price. 

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