Ha Noi Office Market Q3/2024: Strong Demand Recovery in a Tenant-Favourable Market

• Following a relatively quiet first half of the year, the office market demonstrated positive momentum in Q3 across demand, supply, and occupancy. Rental prices have become more favourable for businesses aiming to relocate or upgrade their workspace. 

• Companies in the manufacturing and technology sectors primarily drive demand for office spaces. Tenants are focusing less on location and increasingly prioritising sustainability and green building standards. 

A Tenant-Favourable Market  

Commenting on the Q3 office market outlook, Ms Hoang Nguyet Minh, Senior Director of Commercial Leasing at Savills Ha Noi, said: “The office market performed slower in the first half of the year compared to the same period last year. Office rental demand was subdued due to high prices. However, since the start of Q3/2024, office demand has seen a significant uptick, nearly offsetting the market shortfall from the first half of the year.” 

According to Savills QMR Q3/2024, the office occupancy rate remained stable at 87% year-on-year (YoY). Grade C achieved the highest occupancy at 91%, stable quarter-on-quarter (QoQ) and only 1% lower YoY. Grade A followed with 86% occupancy, down 3% quarterly but up 1% annually. Grade B held the lowest occupancy at 84%, down 1% quarterly and annually. 

Ms Minh added: “By Q3/2024, companies have typically set clear strategies for the first half of the year, allowing them to adapt to changing business dynamics and expansion or operational adjustment plans for the second half of 2024 and 2025. 

Currently, the market offers an excellent opportunity for businesses seeking office space. There is a wide variety of high-quality projects that meet green standards with competitive rents. Many Grade A projects offer rates comparable to those of Grade B.”  

Since 2020, total office supply has increased by 2% annually. Grade A supply has grown by an average of 2%, Grade B by 4%, and Grade C by 1%. In Q3 2024, the office supply reached 2.14 million m2, up 4% QoQ and YoY. Grade B continues to dominate with a 48% market share, providing about 1.03 million m2 of space. 

Office rents in Q3/2024 experienced a slight decrease. Gross rents remained stable QoQ, down 1% YoY, at VND 533,000/m2. Grade A rents decreased by 3% QoQ and 2% YoY. Grade B rent remained stable quarterly but dropped by 3% YoY. Grade C was the only segment with no decline, rising by 1% QoQ and remaining stable YoY. 

Tenants Prioritising Sustainability over Location

The manufacturing sector currently has the highest demand for office space, accounting for 56% of transaction volume, driven by the sector's growth. According to data from the General Statistics Office, on 06 October 2024, manufacturing activity grew positively QoQ, with the industrial value-added reaching an estimated 9.6% YoY increase. 

The next largest tenant groups were distribution and information technology, each occupying 17% of the transaction volume. Both sectors have recorded positive growth recently. Revenue in the IT sector reached USD 118 billion, up nearly 18% YoY, while the distribution sector continued to expand. 

According to Savills experts, transactions in the office market stem from diverse needs such as expansion, relocation, or the establishment of new offices, with 44% of transactions being for relocation purposes. 

Many tenants now prefer West or inner city areas where new projects offer better amenities and competitive rental rates. Central districts such as Hoan Kiem and Ba Dinh are almost fully occupied. The Western area currently leads the market with a 42% share, providing 898,000 m² from 79 projects, including the new Taisei Square Ha Noi. The inner city ranks second with a 39% share, offering 831,000 m² from 72 projects. 

“Central office locations are no longer essential for tenants who do not prioritise location. Instead, they focus on budget optimisation,” Ms Minh shared. 

However, despite the lower focus on location, businesses, especially foreign companies, are now more stringent regarding green certifications. Savills experts noted: “Many tenants, particularly from Europe and Japan, place significant emphasis on environmental and sustainability issues, favouring green office projects.” 

Many investors are quickly catching up with this trend and actively developing green office projects. By 2025, green offices are expected to account for 10% of total supply. 

By 2027, the office market is anticipated to add 462,000 m² of new space from 18 projects. Grade A office projects will dominate future supply with 78%, while Grade B is expected to contribute 22% from five projects. Key upcoming developments include Tien Bo Plaza, 29 Ly Thai To, The Marc 88, Oriental Square, and other Tay Ho Tay NUA projects. After 2027, the supply is forecast to grow by an additional 816,000 m², with 29% located in the Tay Ho Tay area, where all future projects will be of Grade A standard. 

Ms Minh believes: “Future office supply will facilitate easier access to high-quality projects that meet green standards, benefiting business operations.”