The capital city, particularly inner-city areas, currently lacks sufficient Grade A office space for lease, Do Thi Thu Hang, director of research and consultancy at Savills Vietnam, told attendees at a meeting held on October 1 on the Hanoi office market.
As of the second quarter of the year, rental fees for both low- and high-end offices in Hanoi averaged US$42 per square meter per month, up 7% against last year.
The number of Grade A offices only covers 500,000 (28% per cent) out of 1.8 million square meters of the total offices for rent 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.
Some 9% of companies in the city need to lease large offices, covering over 1,000 square meters, but these units account for 53% of the city’s total office area available for rent.
Due to the limited area, office tenants will struggle to find sufficient Grade A office space on a single floor of an office building, Hang added.
Office tenants in the city chiefly operate in the finance, insurance, information and communications technology and real estate sectors. Grade A offices also attract many foreign tenants.
In the coming days, the municipal office market is forecast to become busier, with office rents in general rising a mere 3%, Hang said.
The Capital Place office building, covering 94,000 square meters, is reaching completion and is scheduled for lease next year. In addition, another building, called Lotte Mall Ciputra, will offer 44,000 square meters of office space for rent in 2021.
Further, many Japanese and South Korean firms are seeking to invest in Grade A office projects in Hanoi after realizing the potential of the office space market.
Hang added that the city is facing an undersupply of Grade A properties, but local investors will find it difficult to join these projects. As up to 60% of Grade A office tenants are foreign firms and organizations, they require foreign standards to be met for their offices, which not many local investors can do.
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.
