After three years of grappling with competition from the West, office buildings in Hanoi's central business districts (CBDs) have upgraded, said CB Richard Ellis Vietnam Co. Ltd. (CBRE).

Over the past three years, companies moved "West" in search of better rents, so landlords in Hanoi's CBDs began feeling the pinch for the first time.

This saw fully-integrated commercial areas mushrooming in the West and an increasing office population boosting restaurants and related amenities. This eventually influenced rentals in the West, as buildings filled up and landlords became more bullish, according to CBRE.

To stem and reverse this flow, the market-savvy landlords of CBDs began renovating their aging facilities and started offering new and improved services while also bringing down rents.

Long-standing buildings such as Pacific Place, Hanoi Towers, and Central Building have upgraded their facilities and are providing not just better office space but also improved services with "lifestyle" and "wellness" facilities. These changes have retained as well attracted tenants to keep up with global trends in mobile office environments.

"Wellness is the impact that atmosphere, flexibility and mobility have on one's productivity," Nigel Smith, Managing Director of CBRE Office Agency Services, Asia, noted, adding that it's about not only having a coffee shop in a building's ground floor but also ensuring that the coffee shop provides free power supply for charging mobile phones.

With current CBD rental rates expected to remain stable at least until the end of 2015 and infrastructure development, such as the Metro system, well under way, office tenants are shifting back to town as they thoughtfully consider their real estate strategies for the next 5 to 10 years.

The asking rental of an average Grade A decentralised office building is now approximately 22 USD per square meter per month (it was 15 USD per square meter per month almost 5 years ago).

Meanwhile, the asking rent for offices in prime CBDs has remained considerably flat for the past 5 years; it hovers around 32-35 USD per square metre per month.

"Office tenants are planning to return or are already returning to CBDs as rentals in non-CBD areas have started going up," said Greg Ohan, Director of Office Services for CBRE Vietnam.

"We see office demand strengthening off the back of expected trade agreement ratifications such as the Trans Pacific Partnership and European Union Free Trade Agreement, as well as improved market conditions."

Nigel Smith, Managing Director of CBRE Office Agency Services, Asia, said, "This is a trend that is currently on in many markets such as Hong Kong and Bangkok, where major infrastructure projects have been developed."

International corporate and Vietnamese firms in the market today would use this "urban renaissance" to rethink their operational strategies and not just focus on bottom line as a means of operational efficiency, he said.

Already major international occupiers, including the Danish and Dutch Embassies, JICA, Ernst & Young and Itochu, have shifted from non-CBD areas back to CBDs.-VNA