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Office-for-lease market ready to take off in Hanoi and Ho Chi Minh City

The Grade A office segment in the downtown area of these two cities has a rental occupancy rate of over 95 per cent

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According to real estate services firm Savills Vietnam, in 2017 Hanoi and Ho Chi Minh City continued overtaking other cities around the world to top the list of cities with the most attractive office rental returns.

The Grade A office segment in the downtown area of these two cities has a rental occupancy rate of over 95 per cent.

Location is becoming secondary to facilities and services

A survey by Prime Benchmark showed that in the second half of 2017 the rental rate for high-end office space in Hanoi and Ho Chi Minh City were reported at $38.8 and $52.2 per square metre, significantly lower than neighbouring markets like Taipei (China), Sydney (Australia), Singapore, Seoul (South Korea), and Shanghai (China).

The high office occupancy rate, meanwhile, is due to the market size that is still much smaller than other regional markets. To be specific, the office rental market in Hong Kong (China), Singapore, Japan or Korea are some 7-10 times bigger.

Nguyen Bich Trang, director of CBRE Vietnam’s Hanoi Branch, noted that the growth rate of the office leasing segment depends on a number of factors, including the new supply of office properties, foreign investment, and the quantity of available office buildings. However, in the past years, foreign investment in the local real estate sector has chiefly fallen into the residential segment and hardly went into office buildings.

According to Trang, foreign investors are not interested in the office leasing space as the segment has a surplus of office buildings as a result of a supply boom back in the 2014-2016 period. Yet in 2017, the office leasing segment has been showing positive signals.

“2017 has been a year that will absorb the supply of office properties and 2018 will be a stepping stone for the segment to bloom during 2019-2020,” Trang said.

Shifting demands

It is worthwhile to note that the office leasing market in Vietnam has witnessed a shift in supply in 2017, as tenants have moved to new office buildings to get better services and amenities, while rental rates are not significantly…

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