Looking into property’s crystal ball
Looking into property’s crystal ball
Despite the current oversupply of office for lease space in Hanoi, demand for Grade A and B office in the central business district areas of Hanoi will continue growing by 14 per cent during 2013 and 2014, according to Savills Vietnam.
The company which is a real estate consultant further explained that in the Central Business District (CBD) area, although the average rent is expected to decrease by 3 per cent in 2013, the outcome of the regression model shows a slight recovery in 2014 with an increase of 1 per cent. This is a result of limited new supply in the CBD area in the future.
Hanoi office demand, according to Savills, generally trended upwards from 1997 – 2011. However, the average rent of Grades A and B experienced two downturns from the impact of economic crises in 1997 and 2008.
In the first nine months of 2012, the average rental rate decreased 10 per cent compared to 2011 due to large new supply and threats of overstocking.
There is an increasing trend of moving to the west due to tenants finding greater options providing more value for money.
In the CBD, the average rent of Grade A and B were 13 to 38 per cent higher than that for the whole market in the period of 2007 to current date.
The average occupancy in the CBD was 90 per cent to the third quarter of 2012, 12 per cent higher than that for the whole market.
In the third quarter of 2012, 54 per cent of the leased area of Grades A and B in the CBD is occupied by foreign companies and 46 per cent by local companies.
The average office space demand per tenant of local companies is approximately twice that of foreign companies.
Finance, banking and insurance sectors occupied the largest proportion of office space in the CBD followed by manufacturing industry.
Savills’ forecasting model applied a two-stage forecasting methodology to anticipate the market in the next 2013-2014 period.
Stage 1: Forecast the balance of future demand and supply. The new annual demand is forecast based on take-up by industries. The new annual supply is based on the status of future office projects.
Stage 2: Forecast the average rent by a regression model based on the balance of annual office vacancy and annual net new demand.
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