Office rental rates for Ho Chi Minh City improve, but Hanoi sees a decline

VIETNAM: The office market in Ho Chi Minh City and Hanoi has seen improved occupancy rates but average asking rates are different in the two cities, according to CB Richard Ellis (CBRE) Vietnam Market View’s report for the first quarter.

Ho Chi Minh City saw an increase in average asking rents while those in Hanoi continued to decline.

Ho Chi Minh City’s Grade A and Grade B vacancy rates decreased 3.3% and 3% year-on-year (y-o-y), while their average rents showed improvement, with Grade A up 7.6% and Grade B 5.2% y-o-y.

“The phenomenon of construction projects stopping in early 2012 allowed office supply to stabilise and demand to sustainably absorb what was available,” said CBRE.

According to CBRE, Ho Chi Minh City will see ongoing demand as Vietnam’s economy improves.

On the outlook for Ho Chi Minh City’s future office supply, CBRE said, “Only two high quality buildings, MB Sunny Tower and Vietcombank Tower, are expected to be completed in District 1 which provide approximately 66,000 sq m gross floor area in total. In 2015, more options for office tenants will come from new and emerging second central business district (CBD) precincts.”

Hanoi has enjoyed better occupancy rates for Grade A and Grade B with Grade A’s vacancy rate decreasing to 22% from 24% while Grade B slumped to 32.8% from 33.9% in the last quarter. This was due to a strong net absorption rate and the closing of two Grade B office buildings.

The average asking rents for Hanoi’s office segment continued to decrease across the market with Grade A average asking rents recording a slight decrease of 0.2% quarter-on-quarter (q-o-q), while Grade B rents decreased 3.3% q-o-q.

Average asking rents stood at US$31.40 (RM102.68) per sq m per month for Grade A buildings, and US$17.90 per sq m per month for Grade B, it said.

However, Hanoi’s office market is seeing an added supply of office space as decentralisation continues with tenants moving away from CBDs.

“The West and Midtown new buildings have given occupiers the flexibility to upgrade and consolidate with larger floor plates and cheaper rents.

“The focus has been consolidation and taking advantage of limited and remaining cost-effective opportunities in new buildings with keen developers offering good deals to fill up buildings promptly,” said CBRE. — By Zatil Husna Wan Fauzi

This article first appeared in The Edge Financial Daily, on April 25, 2014.

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