The first Grade A office building in five years and the boom of co-working spaces are the two highlights of Hanoi office market in the first quarter of 2019.
According to a Savills report on Hanoi real estate market, total office leasable supply in the first quarter of 2019 was 1.8 million square meters, a 4 percent increase quarter-on-quarter and 7 percent year-on-year. The market witnessed a five-year high record in average ross rent of US $20 per square meter a month, up 5 percent YoY. Meanwhile, occupancy rate slightly decreased but remained high at the 92% threshold.
In short, the Hanoi office market is showing a steady upwards trend but has yet to reach its maximum development stage.
Associate Director, Leasing at Savills Vietnam Mr. Bui Trung Kien said: “With advantages in infrastructure (future metro line), connectivity with other business districts (CBD & the West) and the largest supply of quality office buildings, Midtown is becoming a Core Business District.”
Rent and Occupancy went opposite directions
Hanoi office market has been added 81,000 square meters from one new Grade A and three other new Grade B projects. The Grade B segment and the West area remained the most active suppliers. Thus, the CBD retained its enticing rental fee level while the coming non-CBD posted a much more desirable rent growth. With 28,450 new startups nationwide including 6,339 fresh businesses registered solely in Hanoi (up 16.2% YoY) and an additional VND 52.6 trillion capital (up 0.2% YoY), occupancy and demand are anticipated to remain at their current high altitude. Average rent is hence forecasted to increase in the short-term since landlords are looking to raise prices.
Strongest growth in the Grade A segment
The CBD welcomed its first Grade A building in five years. Strong FDI and dynamic M&A activities are contributing to an expected increase in interest for Grade A subdivision. There are currently no contiguous spaces in Grade A buildings in the West and the CBD, with the exception of the newly-launched Thaisquare. Existing buildings are aging and lack modern facilities, whilst future developments have legal restrictions and expensive construction caused by scarcity of land. Tenants planning to expand may need to consider relocating to other areas or flexible split-floor solutions.
Boom in Co-working Spaces
Co-working spaces have grown in popularity with Regus, Up, Toong, Cogo, Tiktak, CEO Suite, Dreamplex and WeWork entering. As this model is new, growth is set to accelerate further. Potential entrants include JustCo, Ucommune and The Executive Center. Regus will open a new center in Ha Noi under the “Spaces” brand (2019), Cogo will expand in FLC Twin Towers, Sun Plaza Ancora and more (2019), Rehoboth will open three centers in Ha Noi (2019 onwards) and Toong will integrate into “Wink” hotels (2019 onwards).
Decentralization Continues
New supply of approximately 392,000 square meters is expected to enter until 2020 with the majority coming in from the Secondary and the West. Therefore, tenants are moving from the old busy CBD (Hoan Kiem district) to the more modernized areas – Midtown and The West. Demand drivers include improved infrastructure (e.g. metro lines), increasing commercial and residential developments, as well as large affordable spaces. Districts with limited office supply considering the large number of workers include Thanh Xuan, Hai Ba Trung, Long Bien, Ha Dong and Tay Ho.
