Not land plots or apartments, this is the hot real estate segment in 2019

After increasing by more than 7% in Q1/2019, Grade A office rents continue to rise and are expected to gain the highest record this year as well as in the near future because high new supply of office is still limited.

On July 2, Savills Real Estate Consulting Company published a research report on Hanoi office market in the first two quarters of the year. Accordingly, Savills said that in the first half of 2019, the office for lease segment in Vietnam recorded a record high capacity with large demand, limited new supply and rapidly growing rents.

In the trend of global development, the office market in Vietnam also shows the prospects for developing new and more advanced product lines. After increasing more than 7% in Q1/2019, Grade A office rents continue to rise and are expected to gain the highest record this year and in the near future because high new supply of office is still limited.

Previously, “Savills World Office Yield Spectrum” also reported that Hanoi was the leading city in the world in terms of office productivity with market rates of 8, 57%. Followed by Manila, Adelaide, Ho Chi Minh City and Perth respectively went into the top five globally.

Savills' report showed that, for the third time since January 2017, Hanoi ranked first in the world for Grade A office productivity in the region with a yield of 8.57%. Meanwhile, Ho Chi Minh City, which ranked second in the 'Savills World Office Yield Spectrum' report in the first half of 2017, slipped to fourth place with a market yield of 7.36% in the 2018 rankings.

Commenting on the investment prospects of Vietnamese cities, Ms. Hoang Nguyet Minh, Investment Manager, Savills Hanoi said: “High interest rates show quite attractive correlation of rental income from ground for rent compared to the market capitalization of office buildings. Therefore, the fact that Hanoi and Ho Chi Minh City are having the highest rates of interest in the world shows a very promising prospect for rents and occupancy rates in these two markets".

"It can be said that the office market in Vietnam currently belongs to the seller, in other words if you own an office real estate project, this is a good time to sell" Nguyet said.

Over the past 5 years, real estate has been a popular investment channel with increasing total investment capital across multiple segments. According to Savills Global Research Group, the office is the segment that attracts the largest amount of investment capital - about US $ 340 billion worldwide between the second half of 2017 and the second half of 2018.

Assessing the future office trend, Ms. Minh said that the future trend would be open office and connected office. Currently, developers are more interested in the connectivity of office buildings. Especially, while the central core of big cities is in short supply, there are new supply sources in the area. Expansion core area: In Hanoi, there are Dong Da, Cau Giay and Hai Ba Trung districts.

Ms. Minh also took an example at the Capital Place project (Hanoi) which is going to be put into operation in the third quarter of 2020. The office here has the largest non-columned floor space in Hanoi up to 1,200m2. This is also the first office project in Hanoi that connects directly to Nhon - Hanoi Railway Station. In addition, Capital Place is also the only office building with an independent staircase connecting the floors if the tenant wants to rent two floors...

It is forecasted that by 2020, the office leasing segment in Hanoi will receive approximately 392,000m² of floor space. Currently, tenants are moving from the old Central area (Hoan Kiem) to the new economic areas - the West. In Ho Chi Minh City, from 2019 to the end of 2021, the office market is expected to have 16 new office buildings with a total leasing area of over 400,000 m2. This shows that the office market will have more vacant space as well as continue to maintain sustainable rent increases for both Grade A and B although Grade A rents will remain high.

According to Lan Nhi