A recent report by Savills Vietnam notes that the continued low supply of Grade ‘A’ office space in Vietnams capital city of Hanoi will continue for the foreseeable future and that prices are expected to rise 7% annually over the next three years.
Do Thu Hang, Director of Research and Consultancy at Savills Hanoi, said that Grade A offices accounted for 28% of the total supply of office rentals in the city and that Grade A office rental costs are averaging $31 USD per sq.m / per month and that new offices in the inner city cost $35 USD per sq.m. Hang said that, “It is the highest price in the last seven years.”
Multi-national companies (MNC’s) who have invested in Vietnam or set-up their operations in the country have been a key segment for new, high-end office building and some buildings in the capital city have international tenants leasing more than 60% of space.
However, new MNC’s are finding out that there are fewer and fewer options available for them and the central business district of Hanoi and that there only options are to rent space in older building, many of which lack modern facilities and utilities.
Savills also notes in their report that companies are being forced to move into areas in the western area of Hanoi since even older office building in the Hoan Kiem and Ba Dinh districts are at maximum capacity. It was expected that there would be an upgrade of buildings in Hanoi’s “Old Quarter” district, but it increasingly looks like few of these buildings will re renovated or upgraded until 2030 or later.
Grade B offices in Hanoi have the highest tenant capacity, with average occupancy being in the 94 ~ 95% range. Grade B building prices have remained relatively stable, with average prices being $18 USD per sq.m per month.
In order to meet office space demands, many companies are turning to co-work spaces (CWS) to satisfy their needs, and while this works for many smaller, start-up and entrepreneur based companies, the CWS model doesn’t satisfy tenants who want to have dedicated offices.