Office for lease market sees bright future ahead
Office for lease market sees bright future ahead
The implementation of the revised Law on Real Estate Business is expected to attract a range of new investors to the office for lease market.
From July 1, foreign invested enterprises are allowed to re-lease their rented properties, and can acquire and own a completed building for their own use, provided that they did not develop it themselves.
“This is an important step in extending the business activities that foreign developers are allowed to participate in. The trend of long-term leasing or selling office space is becoming more popular, even in uncompleted office buildings. This is considered another investment channel, as investors look to diversify assets,” said Marc Townsend, managing director of CBRE Vietnam.
Investors are actively collecting new projects in line with this upcoming trend.
Mapletree, one of the biggest Singaporean real estate investors in Vietnam, recently bought The Centre Point in Ho Chi Minh City and Pacific Place in Hanoi, and are currently developing another grade A office building in Ho Chi Minh City.
Many new arrivals have appeared on the market.
Japan’s Daibiru recently announced its first business in Vietnam, taking over CornerStone, the latest grade A building in Hanoi, with a value of more than $60 million.
Meanwhile, UK-based Gaw Capital Partners recently bought four projects from Indochina Land, including the Indochina Plaza Hanoi, with office for lease space of more than 16,000 square metres.
With the expansion of the revised Law on Real Estate Business, experts said that foreign investors would not have to pour a large investment into a whole project, but could buy a portion of the project and re-lease it for profit.
A few domestic investors have been taking on this charge. IDJ Investment is now offering three floors in their Charmvit Tower, located on Hanoi’s Tran Duy Hung street. Office space here is sold at VND42million ($2,000) per square metre (excluding VAT). Sub-investors can buy this space for their office and re-lease it.
IDJ is ready to re-lease this space from the sub-investors after they purchase it. The company will find tenants and commit to a profit of up to 10 per cent per year, for the first 10 years of operation.
IDJ claimed that with this form of investment, sub-investors would only need 10 years for capital recovery. The following 30 years would be reserved for profit.
Experts also predict that the trend of selling and long-term leasing of office space will be more popular in the Vietnamese market.
Moreover, this trend could also apply for office buildings under construction, and could prove to be a new investment channel for investors who aim to diversify their portfolios.
Despite facing a large stock of office for lease space, the average rental is now standing at $30 per square metre per year for grade A, and $18 per square metre per month for grade B.
These rentals, according to experts, are sufficient to attract investors to the office for lease market.
