Office rental in Vietnam goes down due to oversupply

Property consultants said that the office markets in Hanoi and Vietnam this year would face a new rental downward because of oversupply after slides in 2010.

Savills Vietnam reported that during the last quarter of 2010, average office rentals in Hanoi continued falling slightly, around 1 percent against the previous three months to $26 per square metre a month.

Do Thi Hang, head of Savills Vietnam’ research and consulting division was quoted as saying that this was the lowest average level as recorded in Hanoi last year.

Extra office area of the whole market in Q4 reached 51,000 sq.m. Savils forecasted that additional 1.5 million sqm of offices for lease, produced from 125 projects would come up to the market in next 4 years. In 2011, the market will have to face a strong competition because the dramatically increasing supply. Do Thu Hang predicted: “The operation of office Grade A segment in 2011 will drop due to a huge supply will join the market. This year renters will have more options for lower rentals and other preferences investors offer”.

A survey of CBRE indicated that the monthly rental was $41-42 per sq.m of offices Grade A and $27-28 per sqm of offices Grade B in Vietnam. Richard Leech, Managing director of CBRE Vietnam assessed, with project investors, 2011 will be a tougher year with tenser competition.

He noted that excepy some offices with decreasing rentals due to changes of owners and improvements, rentals of most projects went down. More 32,600 sq.m of offices Grade A and B were hired in Q4, the highest figure since 2007. In short term, operational projects will suffer heavy pressure from competition of large buildings to be inaugurated such as Crown Complex, Keangnam Landmark Tower.

Knight Frank also said, Hanoi is facing oversupply while its demand for offices have not yet catched up with. Positive impact of oversupply is that customers have more options with better projects and services. Completed projects including EVN Tower, BIDV Tower, Capital Tower will continue causing heavier pressure on rentals within 6-18 months when office rentals in all districts of the capital city will not increase further and rental offering in the western Hanoi will be lower than central areas.

In HCM City, the office market is suffering a similar pressure. The average rental here was about $20 per sq.m a month in the forth quarter of 2010, a continued decrease of 2 percent against the previous quarter. The renting capacity declined 4 percent for new supplies. As forecasted, the trend will be continued in 2011 because the market will see an extra supply of 562,000 sq.m of offices from 40 buildings, 70 percent of the projects are under construction.

Meanwhile, the Q4 report of Knight Frank consulting firm showed that the rental of offices Grade B+ fell sharply to the current level of $30 per sqm a month. That of offices Grade C now stands at $12-15.5 per sqm a month depending on location while that of offices Grade A is $38-42 per sqm based on used area.

The firm predicted, HCM City office-for-lease market will see a fiercer competition in price, service quality and business teams of buildings. According to initial statistics of Knight Frank, HCM City will receive a series of big office buildings in central districts such as Saigon M&C Tower, Time Square, BIDV Tower, SJC Tower, Vietcombank Tower and Le Meridian between 2011 and 2013.

Meanwhile, Rudolf Hever- Senior Research manager of CBRE Vietnam said the city’s office Grade A rental dropped 4.46 percent in the previous quarter to $25.06 per sqm a month.

First time in 2010, the vacancy ratio of offices in the whole market grew 17.8 percent, breaking the 17.8 percent level in Q4 because of the new supply of 153,599 sqm while new demand for hiring plunged to the lowest level in full last year.

Now, the office Grade C buildings reached the highest real renting volume with 21,861 sqm being used. The overall trend in the near future is that customers will move to specialised buildings, he forecasted.

From VietNamBusiness

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