The Savills Blog

Hanoi Office Market: Opportunity For Investors

Image treatment

Hanoi office market has passed its trough and is currently recovering and experiencing an increase in transactions. From limited market occupancy of only 70% - 80%, office market performance has improved significantly.

According to Savills latest publication ‘Vietnam Office Outlook 2018’, average occupancy in Hanoi reached 92% in 2017 while gross rent price reached 35.2 USD/m2/ month, which translated to a 2.6% YoY increase. These figures are relatively high compared with regional peers and demonstrate the positive performance of the Hanoi office market. However, the enormous potential of this market is yet to be seized as the supply of office space in Hanoi is less than 20% of that in Bangkok, Kuala Lumpur or Jakarta. This showcases that the Hanoi office market has ample room for growth and opportunities for office developers.

Image treatment
Image treatment

The question now is “How investors can make the most of such opportunity?”. Overall market performance does not guarantee the positive performance of all office towers in Hanoi. Savills advice for office developers and landlords would be to focus on quality. Savills Quarterly Market Report Q4/2017 suggested that the grade C sector, though 99% occupied due to low rents, was losing appeal to occupiers. Survey results showed low tenant satisfactory rating as buildings offer office space with limited quality, management and customer services. Occupiers’ tastes are transforming with more of an emphasis placed on the quality of the office space. Recently, many major office transactions in Hanoi originated from tech firms’ demand to upgrade office space from grade C or B to grade A. This contributed to remarkable performance of high-quality office buildings such as Lotte, CornerStone, PVI Tower and Horizon Tower. In addition, economic growth, rising FDI and an increasingly competitive business environment are attracting both domestic and foreign investors and corporations, elevating demand for office spaces in Hanoi. 

Until public transportation projects like the metro line and ring roads are completed and put into operation, the CBD will continue to attract corporate tenants. With limited vacancy, Hanoi’s office market is now waiting for new quality commercial spaces offering excellent opportunities for prestige office developers. 

Recommended articles