Supply

Most of the Grade A office buildings came on stream before 2000 and the total lettable stock of Grade A office space stood at about 85,000 sqm for many years. However, things have changed since @2010 with dozens of new office developments completed and underway, especially in sub-urban locations like around the new National Assembly and Sports Stadium in My Dinh.


It is projected that an additional 170,000sqm of office space will be launched into the market in 2010, following an additional 116,000sqm in 2009, with nearly 1.9m sqm of office space of all grades from around 120 projects expected to be ready over the next 4 years. However, some 95% of the new space will be outside the central business district (CBD), mainly in secondary and suburban districts, with the largest supply in Tu Liem and Cau Giay districts.


Office tenants are increasingly moving to the west of the capital, enticed by lower rents and beater infrastructure. Most office tenants are currently occupying buildings in the central business districts of Hoan Kiem, Ba Dinh and Hai Ba Trung. However, as rents in these areas stay high, tenants are looking to cut costs, moving to the more western areas of Cau Giay and Tu Liem districts. The full occupancy of the 27fl CEO Tower within 3 months of its open­ing in late 2009, and the Viglacera Tower illustrate this trend with My Dinh quickly becoming a new commercial centre. Local and foreign developers have pursued this trend with the construction of projects like the CMC Tower, the Grand Plaza Hanoi, and the Indochina Plaza Hanoi, Keangnam Hanoi Land­mark Tower and Crowne Plaza coming online.

 

Demand

Demand for office accommodation in Hanoi comes mostly from multi-national companies that either wish to sell products and services in the North or wish to be near central government, such as oil companies, diplomats, NGOs, international organisations and large local companies.


Demand in the short term for new Grade A and B office accommodation is expected to come principally from international schools and domestic and overseas financial compa­nies that are seeking large spaces. The creation of a dual market in Hoan Kiem and the western districts and the increasing rivalry between landlords is likely to put further downward pres­sure on rentals.


Demand for office accommodation in Hanoi comes mostly from multi-national companies, diplomatic missions. NGOs, international organisations and large local companies. Demand in the short term for new Grade A and B office accommodation is expected to come principally from companies relocating to or newly establishing in Hanoi or from local `breakaway' companies.

Rental Rates & Vacancy

 
Rental rates rose sharply from @2005-2008 as a reflection of the gross imbalance between the modest amount of the existing supply and continual (albeit modest) increases in demand. Rents leveled off in 2008 and have generally been slowly falling since as more and more stock appears - especially around My Dinh.


The tightening of Grade A and B office supply witnessed in the Hanoi over the last few years was partially due to the emergence of local Vietnamese companies, conscious of the benefits that a prime office address brings to the corporate image.


Average rents have reduced continu­ously since 2008 from around $60-$40sqm for Grade A offices and $35-$20 for Grade B space. As more tenants jump to cheaper buildings in “sub-prime” locations, rents will inevitably continue to fall, at a faster pace, though many landlords will increasingly seek to preserve “headline” quoting rents by offering ever more generous incentive, typically rent free periods.


There is now about 610,000sqm of office space in Ha Noi. Average occupancy across all grades is about 85% and the average rent for all grades and districts around US$27/sqm mth.


Vacancy in Hanoi market totals around 80,000sqm but will probably exceed 150,000sqm by the end 2010, forcing rents down.


Rental rates rose sharply in 2006 reflecting the gross imbalance between the modest amount of the existing supply and continual (albeit modest) increases in demand. Rents increased strongly again in 2007 but leveled off in 2008 and are now falling as more stock appears - especially around My Dinh.