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Office developments to be left out in the cold
Office buildings outside of the Hanoi’s central business district will face more difficulties seeking tenants.
Property consultant Savills Vietnam predicted that in the next four years nearly 1.9 million square metres of additional office space from about 120 projects would come online in the capital city. Ninety-five per cent of new space would be out of the central business district (CBD).
“This will be a very big concern, as the Vietnamese market is still much smaller than other countries in the region,” said Tran Nhu Trung, associate director of Savills Vietnam. The rentals were anticipated to adjust downward and more small- and medium-sized companies would move to higher grades.
“It could be a case of some companies relocating to areas outside of the CBD, as that area will be completely saturated,” Trung said. Savills also cited that with delays and postponements being common in Vietnam, it would be difficult to anticipate when these planned projects would be built.
Phillip Bossley, Head of commercial leasing of Savills, said that if only half of the above 1.9 million square metres was realised, the stock would still be too big.
Meanwhile, Nathan Cumberlidge, market research head of Colliers International in Hanoi said the creation of a dual market in Hoan Kiem district and the western districts, and the increasing rivalry between them could see a potential rental struggle, with landlords becoming increasingly aggressive.
“For tenants, this could either affect the overall headline rentals or see the net effective rents over a three to five-year term drop with the inclusion of greater rent-free periods and incentives,” Cumberlidge explained in the company’s quarterly report.
Vietnam’s economy has seen a recovery since the end of 2009, caused by the return of foreign-invested enterprises, but the office-for-lease segment remained gloomy in the first quarter of 2010.
According to Savills, the demand for office space had not increased compared to the end of last year. Average occupancy levels across all grades and districts had increased slightly to about 85 per cent, which was an increase of about 2 per cent quarter-on-quarter.
The average rent for all grades and districts this quarter recorded a decline of 3.6 per cent against the last quarter, ending at around $27 per square metre, per month. Grade A rents showed a modest increase while Grade B rents had reduced nearly by half compared with late 2009.
As of last month, Hanoi was home to more than 610,000sqm of office space, a slight increase of 3.5 per cent compared with the fourth quarter of last year, contributed by 86 office buildings across all grades and 10 districts.
The two latest buildings, the Hanoi Tourism Tower and Sky City Tower, provided an additional 17,600sqm to the stock this quarter.
Colliers reported that a significant portion of demand in office property currently came from large state organisations involved in finance, infrastructure and power. These occupiers typically wanted to develop their own properties or purchase large areas within new office developments.
vietnamnet, VIR
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