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Soft-fee offices attracting businesses in high inflation age
Higher production costs and more expensive commodity prices have prompted businesses to cut expenditures by leasing soft-fee offices in the suburbs and new urban areas.
As the supply of offices in the centre of cities has become short, leasing fees have been pushed up to overly high prices, which prove to be affordable for multinational big groups or foreign representative offices.
A and B-class offices’ fees are double that of last year, now hovering around $40-70/sq m. C-class offices’ fees have also increased from 20/sq m to $25-30/sq m. As businesses cannot afford such high fees, they have decided to relocate offices to suburban areas to enjoy ‘softer’ fees.
Pham Quang Hung, Director of Hoang Quan Real Estate Appraisal Company, said that in the current difficult conditions, a lot of enterprises have thought of cutting expenses. Small companies now set their headquarters in offices with the leasing fee of $10-15/sq m.
Hung said that soft-fee offices are mainly apartments which have been designed for accommodations. Therefore, they are not as well-designed as other high-grade offices. However, this proves to be a good choice for small companies in the age of high inflation.
For example, a small company operating in the field of trade and services with 15 staffs will need 150 sq m of office. If it leases a B-class office, it will have to pay $4,500 a month ($30/sq m a month). As such the office leasing fee alone would be much higher than the total salaries of its staffs.
Meanwhile, if it leases an apartment of the same area in the same geographical position, it would have to pay $1,000 only a month.
“I think that in the age of high inflation, soft-fee offices prove to be the No 1 choice of many small enterprises,” Hung said.
Bui Quoc Binh, the owner of a real estate firm on Nguyen Phong Sac street in Hanoi, said that there are two choices for small companies now: C-class offices and soft-fee offices.
Binh said that some C-class offices on Nguyen Phong Sac and Tran Quoc Hoan streets have good material facilities and good service quality as they have been upgraded, and have the leasing fee of $15-30/sq m.
The General Director of Century Group, a real estate firm, Nguyen Trung Vu, said that the company has been upgrading workshops into soft-fee offices for lease in order to meet the increasingly high demand.
Vu said that 2/3 of clients who come to seek real estate consultancy services say they want soft-fee offices. For every 7-8 successful office lease transactions a month, ½ involve soft-fee offices.
Vu said that this will be a lucrative market segment for real estate firms in the time to come.
Other real estate developers share the same viewpoint as Vu that the soft-fee office market will be bustling as the demand is increasing. However, they said that as construction material prices are increasing, investors are not overly interested in investments. They said that the state needs to have suitable policies to get investors to inject money in projects on soft-fee offices. For example, the state might not collect land leasing fees, or provide soft loans to real estate developers.
VNE
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