HN and HCM City top new report on office yields

Viet Nam’s two major cities, Ha Noi and HCM City, topped the table of office yields, according to the latest World Office Yield Spectrum report by Savills and Australia’s Deakin University.-Photo tienphong.vn

According to data from 54 cities across Asia, Europe, the US, and Australia, Ha Noi scored highest with a prime yield of 8.75 per cent, followed by HCM City at 8.5 per cent. Taipei brought up the rear with the tightest yield of just under 2 per cent while Hong Kong stood at 2.5 per cent.

“These results are positive and reflect the demand for commercial property in both the major markets in Viet Nam. These figures represent growing confidence and demand by occupiers off the back of general growth in the economy and business confidence showing a buoyant rental market,” said Matthew Powell, Director at Savills Ha Noi.

“Both office markets are relatively small in terms of total leasable area on the regional and global stage, so with the competition and potential market risk factors for international of an emerging market like Viet Nam we have seen yields of commercial transactions come up to these levels. Total numbers of commercial transactions are relatively small, especially involving international investors, and Savills has been involved directly with the majority of these.”

Savills commercial leasing team is seeing very strong demand from occupiers in both markets, and strong investor demand for operating commercial property assets, and Savills is actively working on a number of office property transactions across Viet Nam, he said.

The World Office Yield Spectrum report also found yields across 11 gateway cities had firmed by an average 95 basis points since December 2014, with San Francisco witnessing a dramatic 32 per cent fall from nearly 7 per cent to 4.64 per cent, while Shanghai and LA West barely bothered the analysts with falls of just 0.29 and 0.31 per cent, respectively.

Of the gateway cities Sydney led the pack offering by far the most attractive yields at 5.37 per cent, with LA West and San Francisco the only others offering above 4.50 per cent.

Global office yields continue to firm as investors seek safe havens for their funds amidst ongoing economic and political uncertainties, and with those factors likely to prevail in the short to medium term the office investment markets, particularly in gateway cities, look certain to continue to prosper, according to global investment advisor Savills.

The report editor, Savills’ National Head of Research in Australia, Tony Crabb, said generally office markets looked set for another year of strong investment driven by office property’s most preferred investment status along with economic and political factors which had pushed investors towards the safety of bricks and mortar.

“This is an interesting time in the investment cycle where markets have responded to the inflation/growth trade by pushing bond yields and growth stocks, whilst also recognising office markets should perform well as demand grows,” Crabb said.

He said with some level of economic and political uncertainty remaining in most markets it was fair to say that office risk premiums would continue to offer very good value and hence drive demand and, in some instances, even firmer office investment yields.

“Much of what happens in 2017 and beyond will depend on the course the US Federal Reserve takes with regards to interest rates and the new President’s policy settings.”

“Those factors, along with Brexit negotiations and elections in key European countries, will largely determine how currencies behave, how trade flows and how capital moves around the world,” Crabb said.

He said what, if anything, would limit office property investment was the shortage of stock in most gateway markets which had experienced, in some instances, record investment levels in recent years.

“That shortage of stock is being exacerbated by the strength of leasing markets, especially in gateway cities, which is driving tighter vacancy and rental growth, and landlords are happily holding on for the ride,” Crabb said.