Vietnam’s real estate market was led by Grade B office space in the first quarter of the year, the “Office Market in the First Quarter of 2017” conference held in Hanoi on March 24 heard.
Ms. Nguyen Bich Trang, Director of CBRE Hanoi, said that supply in the office segment has increased slightly.
New supply in the first quarter from the Horison building, with a gross floor area (GFA) of 10,575 sq m, increased the vacancy rate in Grade B space slightly. Horison Tower will be a prominent site in the mid-town area, located within 200 meters of the under-construction Cat Linh urban railway station and set to benefit from the railway’s completion in 2018.
In the months to come, however, the segment will see more competition from the completion of buildings such as the DSD building, with a GFA of 20,000 sq m, the Discovery complex, with a GFA of 49,000 sq m, the Truong Thinh Office Building, with a GFA of 5,400 sq m, and HUD, with a GFA of 70,000 sq m.
In Grade A, a lack of new supply contributed to a 3.3 per cent increase in rents during the quarter compared with the fourth quarter of 2016.
The main factor boosting Grade A absorption continued to be expansion and relocation, especially in the IT/Technology sector.
This increased net absorption reveals current market trends: non-CBD buildings are filling up as companies decentralize from the CBD, an improving economic situation leading to larger spaces for startups and co-working spaces, and a growing desire for better quality buildings.
Ms. Trang also said that green/LEED-certified buildings have become a new topic of focus among developers. Green-certified buildings will soon be expected by office tenants when looking for a new location.
The latest CBRE report noted that after a year of no new supply, Hanoi’s office market welcomed new players during 2016, with one Grade A building and five Grade B buildings. At the end of 2016, total office supply reached nearly 1.2 million sq m of net-leasable area (NLA), of which 65 per cent is Grade B.
Looking forward, rents in both Grade A and Grade B are expected to stabilize in the years to come. Rental growth prospects are limited, as new supply will continue to enter the market, with CBD buildings expected to fare better.
In 2016, average asking rents in Ho Chi Minh City increased due to limited supply combined with strong net absorption and low vacancy rates in each quarter. Supply in 2017 is expected to see strong, steady growth, with new spaces coming in both CBD and non-CBD areas.