The office market in Hanoi was expected to face a shortage of supply (Photo: VNA) Hanoi (VNS/VNA) - The office market in Hanoiwas expected to face a shortage of supply with competition between offices forlease and co-working spaces likely to rise in the future, but was performingwell at present, according to experts.
According to Savills Research, Hanoi and Ho Chi MinhCity witnessed a downward trend of yields from the second half 2015 to thesecond half 2018.
“This again was caused by the limited supply of availableoffice developments for sale, which has resulted in more aggressive biddingprices from buyers, driving yields further downward. The office sector iscurrently a seller’s market in Vietnam; in other words, if you are an officedevelopment owner, now is a good time to sell,” said Hoang Nguyet Minh,Investment Manager at Savills Hanoi.
In the Grade A segment, no new supplies had beenseen in Hanoi for three years, and the Grade B segment had only two newprojects put into operation from the beginning of 2018. The demand for officespace, including new offices for lease and expansion of office space, was stillhigh, leading to a temporary shortage of supply and an increase in occupancyrates and rental prices, reported Dau tu (Investment) newspaper.
According to Savills Vietnam, Hanoi was expectingto receive a new supply with a total area of 500,000 sq.m by 2020, includingfive Grade A office projects in 2019.
Thai Square on Tran Quang Khai street, Hanoi, isexpected to supply 25,000 sq.m alone when it opens in the first quarter of 2019.
By the end of this year, an additional 153,000 m2of office space would be opened. This supply was expected to increase sharplyin 2020-21 and concentrate on the Grade A segment, according a representativefrom Jones Lang LaSalle Incorporated.
Besides that, offices for lease will have tocompete with co-working space.
Vu Thi Phuong, director of Replus Joint StockCompany, forecast that 2019 would witness spectacular growth in the country’soffice for lease segment. Grade A office space, virtual offices and co-workingspaces were expected to see strong development.
Dang Van Quang, director of JLL Vietnam, alsopredicted that in 2019 co-working space projects would increase and bring goodprofits to the real estate industry.
According to CBRE, finance/banking/insurance andtech firms were also seeking new office space.
This year, positive rental growth is expected inboth the Grade A and B segments, especially in Grade A on the back of newsupplies in central business districts (CBD).
According to the latest Savills report, Hanoi offered thehighest office yield in the world at 8.57 percent.
For the third time since January 2017, Hanoiranked first globally for its CBD Grade A office yield. Previous runner-up HCMCity dropped to fourth with market yield of 7.36 percent.
Addressing the investment prospects for Vietnam’scities, Minh from Savills said: “High yields indicate attractive rental incomesagainst capital value of office buildings and the fact that Hanoi and HCM Cityare among the markets that offer the highest yields globally shows healthyrents and occupancy prospects for our cities.”
“HCM City enjoyed its best performance in the lastfive years, with average rents increasing 8 percent year-on-year (YoY) and avery high occupancy rate of 97 percent, while Hanoi recorded a 3 percent YoYincrease in average gross rent in the fourth quarter of 2018 and a steadyoccupancy rate of 95 percent with improved Grade A performance in non-CBDareas.”
“Understandably, these markets have been drawingsignificant interest from international investors; Singaporean, Japanese andKorean in particular. Buyers’ demand remains high, yet there were very fewinvestment transactions in 2018 due to the shortage of available properties forsale.”
Hanoi has more than 1.9 million sq.m of officesfor lease, including 529,000 sq.m of Grade A offices, more than 1.34 millionsq.m of Grade B and about 253,000 sq.m of Grade C.
Rental rates are also quite good. The average rentalprice is about 30 USD per sq.m a month for a Grade A office, 18.2 USD per forGrade B and 14.2 USD for Grade C, a slight increase compared to before.-VNS/VNA
VNA
