Office, Apartment Markets: Unpredictable U-turn

Although official rentals have reduced, vacancy ratio remains high and tends to increase. The demand for low-cost and medium-cost apartments in Hanoi is rising while the retail market continues going ahead with good potentialities, said Second Quarterly Report Highlights released by CBRE Vietnam recently.

CBRE Vietnam said only one Grade B office building was for sales in the second quarter of 2009. However, Grade B offices for lease in previous quarters were still encountering difficulties in finding tenants. This new project lifted up the vacancy of Grade B offices by 5 per cent from the previous quarter to 22.1 per cent. Three office buildings offered for lease since the start of 2009 accounted for more than a half of Grade B office vacancy. If these projects were excluded, the vacancy would only be 10 per cent. The vacancy of Grade A offices also rose to 2.84 per cent.

 

Rent rates of Grade A offices have dropped by 5.6 per cent to US$46 per square metre but the abatement was still lower than that of Grade B offices, at 19.1 per cent. The sharp fall in rent rates of Grade B offices has been attributed to low offers from new projects in 2009. If these projects were not included, the rent reduction was only 7.7 per cent.

 

The serviced apartment market was almost unchanged in the second quarter of 2009. After a sharp rise in the first after, the rate moderated in the second quarter although the vacancy was approximately 11 per cent.

In the second quarter, the average rent declined to US$28.77 per square metre per month, down 12 per cent quarter on quarter. Foreign-managed companies and self-managed projects saw respective drops of 15.5 per cent and 8 per cent quarter on quarter. Due to tighter spending from tenants, the offered rent from foreign-managed companies plunged in the second quarter. Rent rates already fell in the first quarter although some projects delayed the offered rent rate.

 

“By 2011, there will be no new project; thus, the supply of serviced apartments is now quite stable. The biggest concern is the expansion of many small serviced apartment projects invested by private companies,” said Mr Richard Leech, Director of CBRE Vietnam. 

According to CBRE Vietnam, the second quarter witnessed a reversion in all apartment market segments after four falling quarters, except for common apartment segment with little rise. The offered price for deluxe apartments only added only 2 per cent while the rate for high-grade and medium-grade advanced 4 per cent - 5 per cent. The price for low-grade houses soared 12 per cent and even 20 per cent - 30 per cent in some projects.

 

Remarkably, the selling price of old apartments in good locations surged. Most located in areas with plans for upgrading or reconstruction in the coming time. The price jump is attributed to the wish to own houses when upgrading or reconstruction projects are kicked off.

 

From September 1, 2009, Vietnamese people residing in foreign nations will have the right to buy, possess and transfer houses and land use rights in Vietnam. This may push up the demand for deluxe and high-grade apartments.

 

Also according to CBRE Vietnam, retailing revenues stayed stable from the previous year. Although the retail market is generally sustainably growing, commercial centres in non-centre areas are finding it difficult to keep tenants. Commercial centres in the downtown are reported to have an occupancy rate of over 99 per cent while commercial centres in the farther location are seeing the vacancy to jump from 33 per cent in the first quarter to 44 per cent in the second quarter.

 

Average leasing rate at downtown commercial centres is staying at US$54 per square metre a month. The rate for the first floor is up to 90 per square metre per month. This is attributed to the limited supply in the thickly populous area while the rate in suburb commercial centres declined 5 per cent to US$34 per square metre per month.