Office landlords struggling to woo tenants to west of Hanoi

June 25, 2012 | 12:58
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West Hanoi office landlords are struggling to attract tenants due to a supply glut.

CBRE reported 175,000 square metres of new supply would be launched in the area within 2012 and “with the abundant supply in the area, landlords are now aggressively competing against one another by offering generous discounts to secure tenants now rather than facing empty offices,” said CBRE office director Greg Ohan.

“Tenants are well taken care of, with an upper hand in bargaining power in the area,” Ohan said.
During 2012’s second quarter, Hanoi’s net absorption increased significantly, at approximately 28,000sqm, nearly double on-quarter.

However, this figure was mainly due to a strong take-up in Keangnam Landmark 72 Tower, at approximately 20,000sqm. Keangnam came online in 2012’s first quarter with around 95,000sqm. Up to last week, around 40 per cent of space was occupied and Ohan expected it not to climb again this year.

Due to large supply, in the last two quarter, rents in the west fell sharply, with a 14.4 per cent compared to the first quarter of 2012 for Grade A and a 7.5 per cent on-quarter decrease witnessed in Grade B.

Asking prices in the west reduced to less than $20 per square metre per month, compared to around $30 per square metre, per month in 2009’s first quarter. Grand Plaza Hanoi is offering at $26 per square metre per month, including 10 per cent value added tax and a 5 per cent service charge.

Meanwhile, rents at CEO Vinaconex building, located in Pham Hung road are $20 per square metre and the neighbouring HH3 Sudico Tower was offered at only less than $18 per square metre, per month.

Keangnam Hanoi Landmark Tower is offering rates from $21 to $25 per square per month, excluding VAT and service charges. In another building, IPH developed by Indochina Land is also offering the same rental with Keangnam.

Since the beginning of this year, many international and multi-functional companies have been moving their offices west. Major tenants include KPMG, PricewaterhouseCoopers, Ericsson, Standard Chartered Bank, LG, JGC and Cisco.

In response to the trend, offices for lease in the central business districts (CBD) witnessed insignificant changes in vacancy and asking rents, specifically a slight increase in the vacancy rates over the last quarter, with Grade A switching from 3 to 4 per cent and Grade B from 8.5 to 10 per cent.

In terms of asking rents, it is recorded to slightly reduce by 1 per cent on-quarter, in which Grade A down from $44 to $43.6  per square metre per month and Grade B down from $28.3 to $28, including rent and service charges.

“With little supply coming to the market in the CBD compared to the west of more than 25,000sqm in CBD, while this figure is 175,000sqm in the west, CBD is still strongly desirable to many financial institutions and other high-profile companies,’ said Ohan.

Landlords and tenants in this area are having an equal battle in negotiating leasing terms.
 “For any tenant with a lease expiry in 2012, the critical components of success are timing and speed,” he added.

For occupiers who are still considering moving their office to the west, due to increased take up in the first half of 2012, many of the newer Grade A and B buildings are beginning to experience rising occupancy levels therefore incentive packages will be gradually reduced.

“However, with major occupiers moving west, we expect an opportunity for CBD occupiers to capitalise on short-term availabilities in key buildings,” according to CBRE. CBRE also forecasted that till 2012, office segment’s total market supply was expected to increase to 1.1 million square metres.

There will be a significant 74,490sqm new office supply from Indochina Plaza Hanoi, EVN Tower and Detech Tower by the year’s end.

By Bich Ngoc

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