Ha Noi Office Market Resilient in the Face of Headwinds

Ha Noi’s GDP increased by 15.7% in Q3/2022; healthy FDI flows, the entry of new businesses and improved infrastructure drove performance and office demand.

According to Savills Q3/2022 market report, office stock of 2.13 million m2 came from 189 projects, decreasing 1% QoQ after two buildings were taken off the market. The West had the largest supply with 40% or 849,000 m2. The CBD followed with 830,000 m2 or 39% of the supply.

Occupancy stayed high this quarter, increasing 2 ppts QoQ and 4 ppts YoY. Grade C occupancy was the highest at 96%. According to Ms Hoang Nguyet Minh, Senior Director, Commercial Leasing, Savills Ha Noi, occupancy in Ha Noi will continue to rise.

“In the first and second quarters of 2023, additional supply will result in a modest decline in occupancy. New offices between now and Q1/2023 will be more modest at about 10,000 m2 to 30,000 m2. This will allow for steady absorption and will create equilibrium between supply and demand,” Ms Minh added.

Rent Increases Slightly

Gross rent reached VND 503,000/ m2/ month, increasing by 2% QoQ. Grade A had the highest rent of VND 822,000/ m2/ month, which increased by 2% QoQ and 6% YoY. Grade B rent rose by 1% and Grade C improved by 2% QoQ.

Ms Minh shared: “By 2025, rent in the CBD will increase by 5% pa because of the entry of new stock and the renovation of old projects Midtown will also have a 5% pa increase, supported by increases at Capital Place and high-end projects. Due to the demand from ICT companies and new Grade A buildings, rent in the West will also rise.”

Market Outlook

Decentralisation will continue, especially as vacancies in the CBD decrease. New and improved infrastructure like metro lines and ring roads will also boost the real estate market and make it easier for tenants to relocate or consolidate offices outside of the CBD.

Between 2023 and 2025, the non-CBD will welcome 699,000 m2 from 19 new projects, including Grand Terra - 36 Cat Linh, Lotte Mall Hanoi, Tien Bo Plaza, Gelex 10 Tran Nguyen Khan, and Starlake. The West will account for the bulk, with Starlake contributing up to 430,000m2 or 28% of the future supply.

Finance, banking, insurance, e-commerce, and IT companies drive demand and will need more space soon.

Ms Minh noted how many companies are moving to new working models like hybrid offices. They are also looking for high-quality offices and speak to environmental and ESG efforts.

By 2024, there will be at least six new buildings with green certifications. Ms Minh stated, "Tenants are opting for green offices and properties with good amenities that create a productive work environment. Developers are looking at how new and old buildings can become more sustainable. This approach considers both construction and long-term management. We expect green offices to be increasingly in demand.”

Savills delivers a comprehensive range of commercial leasing services for both office tenants and property developers. If you need office buying, selling or leasing service with the help of experts, contact Ms Hoang Nguyet Minh for more information.