Capital suffers office for lease redundancy

The opening of several new developments has added to Hanoi’s already over-supplied office-for-lease market Photo: Le Toan

The grade A segment in the third quarter of this year received more than 45,000 square metres due to the new building. The occupancy rate of the whole Hanoi market reduced, the huge supply and low tenancy of this project.

Cushman & Wakefield Vietnam announced that Hanoi witnessed the market entry of the Lotte Grade A project and the Ho Guom Plaza, which possessed the second largest leasable area among grade A buildings and one Grade B building.

The total office space in Hanoi increased to more than 1.1 million square metres, representing an increase of 5.3 per cent quarter-on-quarter. This glut saw average asking rents for grade A buildings in central Hanoi to fall 0.8 per cent over the quarter.

However, Grade A in non-CBD Hanoi increased 9.9 per cent quarter-on-quarter in terms of average asking rent rate due to the significantly higher than average asking rent charged by the Lotte Centre.

“The participation of the Lotte Hanoi Centre is has pushed supply to exceed demand and increase the competitiveness of the market,” said Alex Crane, director of Office Leasing of Cushman & Wakefield Vietnam. “We predict that falls in rent will take longer in the Hanoi market.”

With more Grade B supply entering the market, average rents for Grade B offices in Hanoi continued to decline by 1.7 per cent.

The occupancy rate across all grades in Hanoi saw a decrease this quarter. Grade A showed the decline of 7.8 per cent while grade B recorded a drop of only 0.8 per cent quarter-on-quarter.

In another report released by Savills Vietnam, they announced that in the first nine months of this year, the occupancy of the whole market reduced by 1.5 per cent compared with the previous quarter. Among these, Grade A saw the highest fall of more than six per cent.

High vacancies have been seen in the PVI Tower, the Charmvit Tower and the VCCI Tower. In the Charmvit Tower, at least 70 per cent is vacant, while the PVI Tower’s occupancy remained very modest.

Savills Vietnam reported that the occupancy rate of office for lease in Hanoi centre was only 67 per cent in the first nine months of this year. Moreover, the supply will increase more in the end of this year, when an additional 60,000 square metres is added to the market from five projects.

Supply, meanwhile, will sharply increase in 2015 and 2016 when more than 600,000 square metres.

As tenants continue to relocate out of the city centre, Grade A office buildings in the centre will have to continue to reduce rents an aim to keep existing tenants and attract new customers.