Office market appears to have turned the corner

According to CBRE, net absorption was 32,600 square metres of Grade A and B office space in the fourth quarter, the highest rate of quarterly absorption since 2007.

About 58 per cent of space absorbed this quarter was taken up in Grade A buildings, mainly in BIDV and Charm Vit Tower, which were new offices gone into operation last year.

In total, around 72,000 square metres of office space were leased out across the city last year.

The increase in office demand has helped decrease the vacancy rates in Grade A office buildings from 25 to 18 per cent quarter. Without taking into account Charm Vit Tower and BIDV Tower, Grade A vacancies remained stable at about 3 per cent in last two years.

Vacancy rate in Grade B buildings almost unchanged, at 15 per cent.

According to CBRE, enquiries for large space were stronger, with more than 20 per cent of enquiries last year requiring space of more than 500 square metres compared to 12 per cent in 2009. Most enquiries were for 50-250sqm offices while those asking for 250-500sqm space account for 15 per cent.

Nguyen Thuy Ha, a researcher from Colliers International Vietnam, agreed that the market welcomed positive signs with strongly increasing demand of tenants from industries such as banks, energy, technology companies, insurance providers and international schools will demand office space as new firms enter the market and existing companies pursue plans for expansion in the west.

In the Grade A segment, while the asking rents of some projects decreased, the rents of some buildings that are under new ownership or have undergone renovations such Vincom and Central Building strongly increased their asking rents this quarter. Average asking rents were around $41-$42 per square metre per month.

Grade B segments showed the remarkable recovery with the average asking rents were around $27-$28 per square per month, an 11.83 per cent increase year on year.

A CBRE statement said the outlook for the office market in Hanoi remained positive due to the global economic recovery, interest from new market entrants, demand from existing tenants with plans to expand current operations as well as activity from contract renewals in 2011.

However, with a significant supply added to existing stock, 2011 will be a good year for tenants that are presented with more options in high quality premises. To developers, 2011 will be full of challenges with the market becoming increasingly competitive, the consulting company claimed.

Ha said in the short term, existing projects with vacant space would face competitive pressures from the big projects such Crown Complex and Keangnam Landmark Tower, Indochina Plaza that will be opened this year.

“In the competitive environment in the next several years, rents will not be the key factor impacting on tenants’ decision to lease office space of a building. They will be carefully consider other factors such projects’ quality, design, location, which services they would be provided and how the offices would be managed. And developers have to satisfy all,” said Hannes Romauch, CBRE associate director.