Prices of Grade A office space rise due to low supply

Hanoi (VNS/VNA) - Prices of Grade A offices in the capital have been forecast to rise over the next three years by seven percent annually due to low supply.

Do Thu Hang, Director of the Research and Consultancy Department at Savills, Hanoi, said Grade A offices accounted for 28 percent of the total supply of 1.8 million sq.m2 of office rentals in the city.

Currently, Grade A office rental costs are 31 USD per sq.m per month on average. Some offices in the inner city cost 35 USD. 

“It is the highest price in seven years,” Hang said, adding that in the high-end office catalogue, Hanoi ranked fourth in terms of capacity and third in terms of rental prices in the country.

While high-end office space attracts 60 percent of foreign tenants thanks to strong developments in FDI and M&As in Vietnam, there are not many options left now. In the inner city, due to limited space for building due to local regulations, many offices are old and lacking modern utilities.

Offices in the Old Quarter were unlikely to be upgraded in the next 10 year, according to Savills, so in Hoan Kiem and Ba Dinh districts, there would continue to be a shortage, so tenants are being forced to move into new areas in the west of Hanoi.

At the same time, Grade B offices with the highest capacity and occupation rates of 94-95 percent have remained stable with rental price of 18 USD per sq.m per month, an increase of 1 percent per year.

Savills Vietnam stated that co-working spaces were becoming increasingly popular thanks to their flexibility in terms and hiring services. Co-working spaces have attracted a lot of start-up tenants and would draw others looking for offices with a variety of rental solutions. 

In Hanoi, co-working spaces are increasingly popular with many different brands such as Regus, Up, Toong, Cogo, Tiktak, CEO Suite, Dreamplex and WeWork. 

Over the past twelve months, Up has opened four new locations with a total size of about 15,500 sq.m; Toong has opened three new locations covering about 7,000 sq.m and Cogo has also opened five new facilities with a total area of about 11,500 sq.m.

According to Savills, innovation in real estate had continued after realty technology (Proptech) started to attract up to 1 billion USD per month globally./.