Hanoi Office Market in the Limelight

 

The primary market keeps operating at low prices with 100 percent apartments being offered for sale with the unit price at less than VND30 million (US$1,500) per square metre and even a half of this at less than VND20 million (US$1,000) per square metre. In an effort to attract buyers without making discount to the sales price, some investors have applied the new strategy, giving more delivery options or providing interior basic packages instead of the full ones with an effort to reducing the price by 30 percent.

 

The secondary market has witnessed the biggest slump of offering price since Quarter 2, 2011. According to Richard Leech, Managing Director of CBRE Vietnam, compared with the latest land market crisis in 2008, the market situation in 2011 and 2012 is even worse in terms of duration and severity.

 

There have been good signs showing that the market is likely to recover in the coming time. Buyers seem to return to the market with a growing number of customers. However, it is not yet confirmed that the market will soon get well when the economy’s future remains unclear.

 

Many investors have changed the business strategy so as to have a better access to the customers. Recently, Sudico has proclaimed a slogan "Build products before offering". This shows that investors have a long-term orientation with the emphasis on marketing and trademark and project quality.

 

In 2012, it is projected that a large number of housing units (around 9,000 units) including villas and attached houses in the urban area will be completed. 30 percent-40 percent of these units are estimated to be completed behind the schedule while only a few completed ones will be used as actual accommodation. This is due to the fact that owners are investors or speculators who do not have real demand for accommodation. Another reason lies in the lack of infrastructures and utilities services in these new towns.

 

The office rental market continues to have good progress with its development plan. In Quarter 2 the total area for rent increased by 4.2 percent against Quarter 1, amounting to one million square metres.

 

The number of customers with demand also went up three times as much as that of the previous quarter. The market had approximately 37,000 sq. m rented. The rate of unoccupied space was 22.5 percent, down by 3.7 percent compared to that of the previous quarter. The unoccupied rate in the West saw the strongest decrease, ranging between 5 and 16.5 percent. On the contrary, the unoccupied rate in the center and districts of Dong Da and Ba Dinh slightly went up, between 1 and 2.2 percent. The decreased unoccupied rate in the West is mainly attributed to the lowered rental fee. Grade A buildings located in the West witnessed the most impressive decrease of 14 percent, followed by Grade B buildings, 8.7 percent. Facing the fact that customers switch to offices in the West, office buildings in the center accepted to lower rental fee by 1 percent. Buildings in Dong Da and Ba Dinh districts were even willing to offer a price reduction of 7.2 percent. 

 

Good progress made to the rented area during the last two quarters shows that demand for renting office is still stable. Companies with modest fund for office renting often opt to offices far from the center where attractive rental policies are applied. Companies providing services to multi-national groups want to hire, expand or move their offices to the center for better convenience in conducting transactions. Despite stable demand, market supply is still very huge, which pushes the market to strong competition. Current market situation will force clients to reconsider projects being implemented or planned. As such, the new supply in the long term is broadcasted to go up at a slower rate, helping to stabilize rental prices.