Office market has positive performance in 9 months

Oct 5th at 10:42
05-10-2023 10:42:16+07:00

Office market has positive performance in 9 months

Việt Nam saw positive performance in the office market in its largest cities, Hà Nội and HCM City, during the first nine months of this year, according to foreign real estate research firms based in Việt Nam.

Gross rent of VNĐ513,000 per sq.m per month in Hà Nội's office market increased by 2 per cent quarter on quarter. —VNA/VNS Photo Thành Đạt

Savills Hanoi's report on the office market in the first nine months of 2023 stated that the gross rent of VNĐ513,000 per sq.m per month increased by 2 per cent quarter on quarter, primarily fuelled by an uptick in Grade A rent. Grade A rent increased by 2 per cent quarter on quarter to VNĐ824,000 per sq.m per month, while Grade B and C rates remained unchanged.

“Office transactions are showing stable or even decreasing prices compared to the same period last year, especially in certain buildings. Prospective tenants should consider this as an ideal time to lease office spaces or expand their existing offices,” said Hoàng Nguyệt Minh, Senior Director, Commercial Leasing, Savills Hanoi.

Occupancy increased by 1 percentage point quarter on quarter but fell by 2 percentage points year on year to 85 per cent. High-quality Grade A projects continued to attract new tenants, particularly foreign companies scouting premium locations, according to Savills Hanoi.

Take-up in the third quarter of 2023 was the highest since 2020 at 44,500 sq.m. Grade A was the most popular product.

Leasing activity was active over the nine months. Manufacturing tenants secured the most deals and the largest total leased area, with information and communication technologies (ICT), finance, insurance, and real estate sectors (FIRE), and education tenants following closely behind. Relocation secured the most deals, and most tenants favoured the Secondary area due to the availability of new, high-quality projects and more budget-friendly rents while maintaining proximity to the central business districts.

The stock of 2.16 million sq.m of net leasable area (NLA) in the third quarter increased by 1 per cent quarter on quarter and 2 per cent year on year after the entry of Lotte Mall West Lake Ha Noi with 23,000 sq.m of NLA.

Since 2019, Grade B stock has increased by 5 per cent per annum (pa), Grade A by 4 per cent pa, and Grade C by 1 per cent pa. The West was the largest supplier with a 41 per cent share or 875,800 sq.m of NLA, while the secondary had the most significant growth of 3 per cent year on year.

Meanwhile, the vacancy rate of offices in HCM City reached 18 per cent in the third quarter of 2023, with rents decreasing by between 0.2 and 2.2 per cent quarterly, according to Knight Frank Vietnam, a leading real estate consultancy.

In its report on the HCM City office market in the third quarter of 2023, Knight Frank Vietnam predicted that in the fourth quarter, the office vacancy rate would increase to over 20 per cent due to new supply in the Thủ Thiêm area in Thủ Đức City, marking a 12-year high.

Specifically, in HCM City, rents decreased by 2.2 per cent quarter on quarter for Grade A offices and 0.2 per cent for Grade B offices, while the Grade A office vacancy rate increased to 18.2 per cent and that of Grade B rose to 11.6 per cent. Currently, the Grade A office segment has a total vacant floor area of about 73,000 sq.m and an average asking rent of US$57.60 per sq.m per month.

Alex Crane, CEO of Knight Frank Vietnam, stated that a decrease in office rental prices had already been forecasted in 2022, so this is not a shock to investors. On the other hand, the new supply is welcomed by the market, as the city has not had any Grade A office buildings since 2017. He commented that this period is too long for a large urban area like HCM City.

According to Knight Frank Vietnam, the total office floor area for rent is currently higher than it was in 2011.

It noted that the trend of reducing the average rent of Grade A offices is partly due to the impact of the opening of new office buildings in the Thủ Thiêm area, which have more attractive asking rents than the central area in District 1.

The report also indicated that there would be another office building coming into operation in the fourth quarter, providing an additional 50,000 sq.m of floor space for the Grade A office market, pushing the vacancy rate to more than 20 per cent by the end of this year. During the same period, Grade B office rental prices are also expected to decrease by 6 per cent, down to $32 per sq.m per month.

Savills Hanoi stated that by the end of 2026, Hà Nội's Grade A & B office market could witness 220,000 sq.m of additional supply, or a 13 per cent increase from the current stock.

The supply of large-scale projects up to 2026 is expected to exert pressure on rentals, especially within the Grade A segment, which will welcome nine new projects, including 68,400 sq.m of green office space. Forecasts suggest that Hà Nội Grade A and B occupancy might decline to 85 per cent, leading to a slight reduction in rents.

Both HCM City and Hà Nội have performed commendably, particularly when compared to their regional counterparts that are chronically oversupplied. Both cities are now poised to receive a refresh of quality supply that will, for the most part, accelerate obsolescence in poorer quality assets, according to Savills Hanoi.

Việt Nam office markets benefit from structural drivers that can easily surpass historical averages. These include the continued growth of the banking and insurance sectors, which traditionally occupy large office spaces, and large-scale relocation of government offices.

Savills also highlighted that more than 85 per cent of Việt Nam's fastest-growing companies have ESG commitments, leading to a surge in demand for offices that meet green standards. 

Bizhub





RELATED STOCK CODE (3)

NEWS SAME CATEGORY

A quarter of real estate firms expected to survive 2023 without help

By mid-2022, a series of tighter regulations had caused a sharp contraction in property supply, weakening the market's liquidity. In the first quarter of 2023, the...

Hanoi completes $27-million road to Soc Son satellite urban area

The project will enhance transportation connectivity, attract investment, ease traffic congestion on National Highway 3 leading to Noi Bai International Airport...

Task obvious for Vietnam’s green building development

Green building investors are suffering from difficulties in accessing and ensuring additional investment capital for the project, as well as unclear regulations.

NAI Vietnam: your companion on the quest for ideal commercial spaces in Vietnam

NAI Vietnam is an increasingly notable player in one of the world's largest commercial real estate networks.

Việt Nam’s commercial real estate remains competitive

Hà Nội and HCM City continue to attract investors thanks to the competitive rental costs for offices and high-end retail spaces, accompanied by a high occupancy...

VN needs appropriate deposit level for property auctions to prevent market distortion

An appropriate deposit level for property auctions is critical to prevent price inflation and speculation, experts have said.

Contractors selected to renovate old apartment buildings in Hanoi

Since July 2021, city officials have approved more than 1,000 quality control plans for old housing.

Vietnam is lacking in green buildings: construction official

Vietnam is home to over 300 green buildings, but that figure is much lower than the country's potential, according to a construction official at the Vietnam Green...

Mekong Delta beckons real estate investors

The Cửu Long (Mekong) Delta, known as Việt Nam’s “rice bowl”, is emerging as a promising destination for real estate investment due to its improving connectivity...

Hopes rise for light in real estate fortunes

Real estate observers are predicting that difficulties in the market will ease in the last months of the year thanks to proactive interventions from the government...

Real estate stocks

Construction stocks


MOST READ


Back To Top