Hanoi Office Market- Ample Opportunity for Investors

4:35:00 PM | 29/3/2018

“After being plunged to the so-called bottom, the Hanoi office market has been now back on track to recover and grow. This promises ample opportunity for investors,” said Mr Bui Trung Kien, Director of Savills Hanoi Commercial Leasing.

Specifically, according to figures in the latest edition of Savills’ 2018 Vietnam Office Outlook, the average office occupancy rate in Hanoi was 92 per cent in 2017 and the monthly rental was US$35.2 per square metre, up 2.6 per cent over 2016. These very optimistic figures are quite high relative to other markets in the region.

A few years ago, the office occupancy rate was only 70 - 80 per cent and investors had to put a lot of effort into marketing and incentive programmes to draw tenants, but market performance has now improved significantly.

Nonetheless, the market potential has not really been utilised because the supply of office space in Hanoi now reaches only 1.6 million square metres, less than 20 per cent of available supplies in regional competitors Bangkok, Kuala Lumpur or Jakarta. This showed that the Hanoi office market has much room for development and promises great opportunities for investors.

In addition, in its recent report “Vietnam Property Market Prospects 2018”, CBRE (Vietnam) Co., Ltd. said that, 2017 elapsed with a plenty of positive signals in the Hanoi office market. With a moderate supply and good demand from both traditional and new industries, CBRE expects that the market will continue to grow in 2018.

CBRE said that supply growth tends to slow from 10 per cent annually in 2012 - 2016 to 5 per cent in 2017, allowing the market to absorb vacant spaces.

As a result, the market witnessed a rise in asking prices in both Grade A and Grade B for the first time in 10 years. In another remarkable development, the occupancy rate of Grade A office buildings averaged 91 per cent at the end of 2017, resulting in the lowest vacancy since 2011.

The question is how investors should take advantage of this opportunity. The good performance of the overall market does not guarantee the good performance of all office buildings in Hanoi. Savills thus advised investors to focus on quality.

Savills noted a number of big deals recently due to the demand for higher upgrades from technology companies, moving from Grade C or Grade B offices to Grade A offices. This has boosted the good performance of quality buildings such as Lotte, CornerStone, PVI Tower or Horizon Tower.

In addition, macroeconomic growth, FDI growth and increasingly competitive business environment have attracted domestic and foreign investors and businesses to Hanoi.

In the coming time, four downtown business districts of Hanoi are expected to remain a hot spot for tenants until the city's public transport projects such as elevated railways, overpasses and ring roads are completed and put into operation.

“Given the limited space available, the market will continue to look for new quality commercial spaces and promise huge opportunities for well-reputed office investors in Hanoi,” said Mr Kien.