Unpack Office Rent and Occupancy In Ha Noi

How ESG Influences Negotiations

In Q4/2022, office occupancy in Ha Noi increased by 1 ppt quarter-on-quarter (QoQ) and 7% year-on-year (YoY). Grade C had the greatest occupancy at 96% and Grade A had the largest take-up of 54,979 m2.  

Grade A had the highest rent of VND 852,000/m2/month, increasing by 4% QoQ and 11% YoY due to increases at Charmvit Building and PVI Tower. Grade B rent increased by 6% QoQ and Grade C by 7% QoQ due to major increases at several projects. 

Hoang Nguyet Minh, Senior Director, Commercial Leasing, Savills Ha Noi commented: “In the past, the investment costs for a Grade A office building was between US600-700/m2. However, with buildings now having to meet international standards and green criteria, investment costs are between US1,000 /m2 and as high as US1,600 /m2.” 

“Office rent in Ha Noi increased in 2022, however, new, high-quality projects drove the increase. Some older properties had decreases. Therefore, the increase is not significant to the overall market. In 2023, rent will increase significantly because of the Grade A pipeline.”   

In 2022, banking, finance, and insurance (FIRE) tenants relocated from the CBD to the Secondary area. Tenants enjoy high-quality buildings and competitive prices in the Secondary area. Building with green certificates and high technical specifications are popular.  

This puts pressure on old office buildings, Minh analysed: "Demand is increasing, especially from IT, FIRE, and manufacturing companies. These tenants have stringent technical specifications, which widens the gap between modern and old properties. Old Grade A buildings without plans to renovate or upgrade will need to decrease rent or they will not be able to compete .” 

Enterprises are increasingly conscious of ESG requirements. Workplaces must now speak to health, flexibility, and sustainability as well as productivity and collaboration. By 2025, at least seven office projects in Ha Noi will receive green certificates, bringing stock to 276,000 m2. Minh said: “Enterprises are increasingly conscious of legal and sustainability requirements, which means lengthy approval processes. This process can take up to a year because developers must ensure projects meet ESG requirements. Although the market will be more active in 2023, transactions will take longer.”

See about: Vietnam Quarterly Market Report Q4 2022 

Offices Still Make Attractive Investments

According to Minh, offices deliver attractive returns on investment. She added: “Usually when a building achieves an average occupancy rate, the profit margin is pretty good. Tenants will usually sign a five to ten-year contract, which allows for a stable cash flow. During the pandemic, long-term leases meant occupancy remained high, which means that investors can feel secure even during market fluctuations.” 

In Ha Noi, certain areas are more suited to particular industries. For example, in Ha Noi, the CBD is primed for embassies or tenants in finance, insurance, investment, and securities companies. The Secondary area is popular with corporate tenants, and multinational corporations in IT, consulting, and banking. The West focuses on manufacturing, research, and information technology companies.  

Conclusion

Savills delivers a comprehensive range of commercial leasing services for office tenants and landlords. Contact Ms Hoang Nguyet Minh for more information. 

See Further:  

• Change drive Office Redefinition

• What You Need to Know about Finding Your Office in Vietnam 

• Ha Noi Office Market Resilient in the Face of Headwinds