Hanoi Office Market: Absorption Rate Rises

During this quarter, the office market in Hanoi continued recording a relatively strong demand, the absorption rate of over 40,000m2, mainly coming from local businesses. The vacancy rate in the whole market dropped to approximately 20 percent in the quarter, from 25 percent in the previous quarter. The vacancy rate in both Class A and Class B buildings decreased 6 percent quarter-on-quarter, to 20.2 percent and 19.4 percent respectively.

 

The average offered price of Class A and B both showed a slight decrease of 1.2 percent and 0.3 percent quarter-on-quarter, hit US$30/m2/month and US$18/m2/month respectively. This reduction can be clearly seen in Dong Da and Ba Dinh districts where many buildings have implemented the policy of reducing rents in exchange for attracting more customers. On the other hand, rents in the central area followed a reverse trend, with a slight increase of 0.2 percent quarter-on-quarter in Class A and 2.6 percent in Class B. This also happened for Class B in the western area. Given explanation was that some new buildings had reached its’ target of occupancy or some perennial buildings had only some vacancy left.

 

CBRE expected around 240,000m2 floor office would come into the market in 2015. It is noteworthy that 70 percent of this future supply would come from the west, putting pressure on rents in this area.

 

CBRE predicted 2015 would be the year of Class A buildings due to the fact that there would be no new supply of Class A this year. In addition, rents of Class A buildings, especially in the western area and Dong Da, Ba Dinh was getting more and more reasonable, enabling companies to rent high quality office space for the same price of Class B buildings in the downtown. Moreover, positive economic statistics in the first quarter have improved the 2015 economic prospects, stimulating the activities of businesses and attracting new investment. Thus, the occupancy rate at office buildings was expected to continue to rise.