A new trend has emerged in Hanoi’s office leasing market in the first three months of 2019 due to the declining supply in the city centre as well as the disadvantages in amenities and price. Hanoi’s real estate market is now expanding from the centre, towards the neighbouring areas and new business centres. Tenants now prefer office buildings in the west of Hanoi.
|Leadvisors Tower, expected to be put into operation in the third quarter of 2019, is one of the few Grade A buildings in the west of Hanoi |
Rent up, occupancy down
According to Savills Vietnam’s report on the Hanoi real estate market in the first quarter of 2019, the city’s office leasing market is facing a scarcity in office space. After three years, only one new Grade A and three new Grade B projects have been rolled out into the market. The projects added a combined 81,000 square metres, bringing the total supply to 1.8 million sq.m, 4 per cent higher quarter-on-quarter.
It is noteworthy that the central business district welcomed its first Grade A building in five years. There are currently no contiguous spaces in Grade A buildings in the west and the CBD, with the exception of the newly-launched Thai Square.
In the first quarter of 2019, the average gross rent reached $20 per sq.m per month, increasing by 2 per cent quarter-on-quarter and 5 per cent year-on-year. Average occupancy declined by 2 percentage points quarter-on-quarter and 1 percentage point year-on-year to 92 per cent.
It is forecasted that office demand will continue to rise in Hanoi. There are 6,339 newly-registered businesses in the city, surging by 16 per cent per annum, which will create additional demand for office-for-lease in the coming time.
According to Savills, new supply of approximately 392,000sq.m is expected to enter until 2020. Tenants are moving from the old CBD (Hoan Kiem) to new business areas like Midtown and the west. Demand drivers include improved infrastructure such as Metro lines, increasing commercial and residential developments, as well as large affordable spaces. Districts with limited office supply considering the large number of workers include Thanh Xuan, Hai Ba Trung, Long Bien, Hadong, and Tay Ho.
Research by other consulting and brokerage firms shows that there is not so great supply of high-quality and fully-equipped offices in the west. On the other hand, there is high availability but low demand for Grade B and Grade C offices.
On Pham Van Dong Boulevard, from Thang Long Bridge to Mai Dich Flyover, no new Grade A office building has been rolled out apart from Leadvisors Tower. Located at 36 Pham Van Dong Boulevard, Leadvisors Tower is one of the few Grade A office projects highly appreciated by investors.
According to the developer, Leadvisors Tower is one of the first Japanese-standard office buildings in Vietnam. The tower is expected to be put into operation in the third quarter of 2019. The project has recorded a healthy take-up rate so far with a good number of tenants having rented office space already.
“We would like to have a spacious, airy, and modern working space in the west but it is not easy to find an ideal place. Leadvisors Tower was one of the outstanding options given that there will be scarce supply of Grade A buildings in the west in the coming time,” Mai Anh, a business owner said.