At the beginning of 2019, several real estate industry experts were asked to give their opinion and projections on the Hanoi and HCMC office markets and whether these cities will continue to be among the best performing markets globally. Here are some of their comments and predictions:
Troy Griffiths, Deputy Managing Director, Savills
• Growth and strong demand this year will continue amidst supply constraints. "The demand driver is very strong, especially that from the booming financial services sectors like insurance and banking."
• Rentals will rise across the board. "The Hanoi market’s rental might grow somewhere between 7 to 15% across all grades this year, while it will probably be slightly lower in HCMC, at 11% for A grade.
• "Rental will continue to trend up until supply catches up. Occupancy will be very strong at 90 percent and above. This will be much a story for 2019."
• Foreign investors interested in office investment will find a lot of challenges. "The reality is that land in CBDs in HCMC and Hanoi have a great deal of domestic ownership."
• While the opportunities in office investment in the HCMC and Hanoi CBDs are obvious, international investors should seek long-term joint venture partnerships. "There are more and more domestic real estate companies listed on local bourses and they are very active in the property market. That gives an opportunity for greater liquidity and great foreign ownership. I think it’s pretty essential for foreign investors to have good joint venture partnerships with such firms."
Dung Duong, Head of Valuation, Research & Consulting, CBRE
• Hanoi and HCMC will continue to be two of the world's best performing office space markets this year. "Grade A average asking rent in HCMC is expected to increase by 4 percent in 2019, while occupancy will reach as high as 96 percent."
• In Hanoi market, positive rental growth is expected in both grade A and B, especially in grade A on the back of new quality supply in the central business districts (CBD) in 2019. "This will become the newest grade A supply after three years of no new supply. In terms of demand, apart from traditional sectors such as banking, insurance, manufacturing and IT, co-working space is expected to continue to be a major source of demand."
JLL’s recently published office research
• The HCMC market added 60,269 square meters of new supply from two grade B and four grade C buildings in 2018, taking the total inventory to nearly 1.97 million sq.m.
• The robust demand had pushed the occupancy rate to more than 96% by the end of last year. "Technology, IT companies and flexible space operators continued to show signs of expansion, while tenants in services, finance and manufacturing continued to dominate leasing demand in the market."
• Average rent was $23.6 per square meter per month, up 4 percent from the previous year.
• In HCMC, there was no new grade A supply added last year and only one new grade A building will be added in 2019, the Lim Tower 3 in Nguyen Dinh Chieu Street, District 1.
• In Hanoi, given the buoyant Grade A demand and limited premium supply, some buildings in the CBD with high occupancy rates have continued to increase rents in throughout 2018.
• Thai Square fronting Tong Dan and Tran Quang Khai streets in Hanoi’s Hoan Kiem District, are expected to come into the market in the first quarter of 2019, adding more than 25,000 sq.m to the inventory. By the end of 2019 some 153,000 sq.m of space is expected to be added.