Hanoi office lease market awakens

As no new buildings have come on to the market in the last few years except the Vietcombank Tower, the third quarter saw owners of office buildings in Hanoi satisfied with vacancy levels of only 5 per cent across all grades.
Occupancy levels of A, B, and C grade buildings were 97, 95 and 92 per cent respectively, an upturn compared to the late 1990s when the Asian financial crisis drove occupancy rates down to 30-40 per cent as foreign investment fell just as a number of buildings opened.
As demand during the crisis was not enough to bolster occupancy, owners had to reduce rents by more than half. However, due to a limited new supply in the last couple of years, they have been able to pick rental rates up to the current average levels of $20/sqm/month.
Rents have increased by $2 since the beginning of the year and more growth is expected for the rest of 2003 and the next few years.
However, take-up in the third quarter was smaller than expected. Demand from new clients was not strong and main deals were in tenant relocation and expansion.
Better economic outlooks for next year predict growth in the demand for office space in the near future. The government’s recent investment promotion activities and suitable macro-economic policies will attract more foreign-invested projects next year, nurturing the bright market and the rent increase.
Some multi-national companies with long-term commitments in Vietnam are planning to relocate. This is expected to increase the number of businesses from the US, Singapore and Japan that choose to set up in Hanoi.
High land prices and troublesome procedures for land clearance will see no joint-ventures in office building in central business districts and no buildings will be opened in the rest of this year.
A number of Vietnamese developers have detected business opportunities in the market and opened small-scale buildings. The Thang Long Ford and 14 Lang Ha buildings are typical examples that have benefited from limited new supply to gain steady take-up.
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(*) Hanoi Property Management Company
Located near Lenin Park and the Vietnam Chamber of Commerce and Industry, it will provide a total 35,000sqm with two floors earmarked for restaurants.
The project was initiated in 1997 by Vietnam National Shipping Lines, the largest shipping company in Vietnam. Tenants can expect a high level of services as its management is training the staff to international standards.
Because there are no other large buildings that can provide 1,000sqm on a single floor, Ocean Park will be attractive to multi-national corporations that need a large space to expand their business in Vietnam.
(*) Hanoi Property Management