Hanoi: Grade A office has a lot of potential

According to the latest statistics of Savills Vietnam, currently Grade A office segment in Hanoi has 23 projects, providing about 460,000 m2. Compared to other countries in the neighborhood such as Singapore and Malaysia, the total area of Grade A office Vietnam is only about 11-15%. This shows that the potential of Grade A office market in Vietnam, especially in Hanoi is plentiful, expected to grow strongly in the future.


The trend of moving out of the center


Savills' market analysts said Hanoi's office market is the hottest spot in Southeast Asia as a large number of foreign investors are targeting Vietnam. This is also the city with the most shortage of office supplies, especially Grade A offices. Statistics show that the Hanoi office market is dominated by three areas: the focus area is Hoan Kiem district, accounting for 16% of office supply; Ba Dinh - Dong Da area accounts for 39% and the western area accounts for 42%.


In particular, the area of Ba Dinh - Dong Da and the west accounts for a large proportion of the city's Grade A office supply. According to market researchers, these are areas that will have a shift in both position, rent and attract human resources in the future.


In particular, in the context of the central district of Hoan Kiem, the shortage of Grade A office supply started due to increasing demand for tenants, limited land fund, the Ba Dinh - Dong Da and the west side were considered to be the ideal choice for developing quality office buildings.


According to statistics, Hanoi Tower currently has a occupancy rate of 99%, 63 Ly Thai To 100%, Pacific Place 93%, Center Building 100%, BIDV Tower 100%, Capital Tower 96%, Daeha Complex 98%...


The Grade A office segment in Hanoi still has a lot of potential.


In the near future, the 37-storey Capital Place (29 Lieu Giai and Ba Dinh) buildings will provide about 121,000 m2 of total floor area, with adequate space and service facilities. This project accounts for one third of Hanoi's current Grade A office supply, meeting the demand for space for a number of diplomatic representatives and foreign companies seeking quality office for rent when redirecting investment in Vietnam.


Experts said that the central office market will continue to have increased rents with a project coming into operation in 2020. Hoan Kiem district has the highest rent with an average increase of 3%/year. According to statistics, the rental price of Grade A office in Hoan Kiem is 40-42 USD (about 940,000-987,000)/m2; Ba Dinh - Dong Da area is priced at 34-35 USD (about 800,000-822,000)/m2, the western area is at a good level from 20-25 USD (about 470,000-587,000)/m2. Expected, the price of the Capital Palce building will be from 40-42 USD (about 940,000-987,000)/m2, equal to the price of Hoan Kiem district.


Tenants prefer the area with many utilities


According to Matthew Powell, Director of Hanoi Savills, Vietnamese businesses currently occupy the highest rent rate (34%), followed by South Korea 19%, Japan 14%, America - England - China all 7 %... This shows that Vietnamese enterprises are experiencing strong growth in both quantity and quality. Regarding the demand of tenants, the financial, technology and banking groups account for 50% of the leased area, the technology and production sectors account for 14%, the rest are other industries. Factors promoting demand include improved infrastructure (elevated railway lines), an increase in commercial projects and housing, or large rental areas at reasonable prices. 


Currently, some companies want to recruit new employees and retain talented people. Therefore, buildings with convenient location for employees to move, comfortable and dynamic working space to help employees promote their creativity and improve productivity will be prioritized.


“There are up to 60-70% of employees working at offices. Therefore companies will find regional offices that have the most utilities to create the most favorable environment for employees and increase the productivity of employees” said Savills expert. In addition, co-working space offices - where both working and relaxing areas are also tendencies have been welcomed by tenants recently. In the near future, when the administrative agencies are moved to the west and the West Lake area, personnel in office buildings around this area will be very convenient when coming to work with agencies and agencies. This greatly affects the movement of tenants. In general, the office market in Vietnam is considered the home market. Demand increased in the context of scarce supply, causing investors to continuously increase rents and keep negotiating positions.


According to Mattew Powell, forecasting for Grade A office segment, after increasing more than 7% in the first quarter of 2019, office rent continues to increase because of limited supply. Meanwhile, occupancy rates are always high with an average rate of 92% in Hanoi and 98% in HCMC in the first quarter of 2019. Tenants can only accept price increases or select other rental options.


According to Tam An