• The Ha Noi office market witnessed growth in the first half of 2024, with the Western area leading in supply and an increasing trend of office shifting from the central areas.

• Globally, businesses and investors increasingly focus on ESG criteria, particularly developing green offices to achieve sustainability goals, improve employee health, and optimise long-term operational costs.

Ha Noi office market continues the trend of relocating from the CBD

The first half of 2024 brought positive developments in the Ha Noi office market, with the West area emerging as a significant highlight. According to Savills H1/2024 market report, Ha Noi's office supply reached 2.13 million m2, remaining stable quarterly and annually. Grade B offices constituted the largest share, accounting for 48% of the market, or approximately 1.03 million square meters.

By region, the West held the largest supply share with 41%, equivalent to 871,836 m2 from 77 projects. The inner city had the second-largest supply with 39%, or 836,157 m2, from 73 projects. The Hoan Kiem area - the city centre - had the scarcest supply.

The growth rates of office supply vary significantly across different grades. The supply for Grade A increased by 6%, Grade B by 5%, and Grade C by just 1% year-on-year (YoY).

With limited supply in the CBD, the relocation trend becomes inevitable. Contributing factors include competitive rental prices and advancements in infrastructure, which further support this shift.

Regarding the impact of rental prices on the relocation trend, Ms Trinh Huynh Mai, Associate Director of Commercial Leasing of Savills Ha Noi, explained, "The shortage of offices in the Hoan Kiem area drives rental prices up. Meanwhile, the near-central and the western areas still offer a competitive rental rate, which encourages shifting.

"According to Savills' report, gross rent reached VND 534,000/m²/month, up 1% QoQ and stable YoY. Grade A rent reached VND 876,000/m²/month, up 2% quarterly and annually. Grade B rent reached VND 452,000/m²/month, up 1% quarterly but down 3% annually. Grade C rent increased by 1% quarterly but decreased by 1% annually, reaching VND 322,000/m²/month. Grade A saw the largest new leasing volume, with 6,955 square meters in Q2/2024. Grade C followed with 4,375 square meters, while Grade B decreased by 1,694 square meters.

Ms Mai highlighted that by 2035, 36 ministries and agencies are set to move their headquarters to the western area of Ha Noi, including Tay Ho Tay in Tay Ho, Bac Tu Liem, and Me Tri in Nam Tu Liem. This large-scale relocation is expected to redirect the workforce and traffic to these areas, enhancing access to public services and the relocating trend.

The future supply in the New Urban Area of Tay Ho Tay is substantial. It may compete with districts within the CBD, the near-central, and the West, putting pressure on future rental prices and occupancy rates, particularly for Grade A.

Metro Line 3.1's operation from Q3/2024 is expected to support supply and performance along the line and towards the West.

The New Urban Area of Tay Ho Tay is expected to have 450,724 square meters of floor space from 2025 onwards. All future projects in this area will be Grade A.

By 2026, 480,723 m2 from 19 projects are expected. Grade A offices will account for 75% of the supply with 14 projects, of which 60% of Grade A supply will come from the West. Grade B offices will provide 24% of the future supply from 4 projects by 2026. Notable projects from 2024 to 2026 include the New rea of Tay Ho Tay, BRG Diamond Park Plaza, Taisei Square Ha Noi, Tien Bo Plaza, and Heritage West Lake.

The green offices sector will continue to grow in the long run

Both domestic and international businesses are showing great interest in ESG (Environmental, Social, and Governance), considering ESG a key factor in strategic development and decision-making. Notably, listed companies in Viet Nam and globally strive towards "Net Zero", applying it to business and governance. Therefore, choosing green offices has become integral to these enterprises' sustainable development strategies.

Ms Mai commented, "Green offices are a trend not only in Viet Nam but across the Asia-Pacific region. Approximately 40% of Grade A office supply in the Asia-Pacific region is green offices."

Although Viet Nam is relatively slow in transitioning to green offices, developers are accelerating progress to keep up with global trends. In 2020, Ha Noi had its first building to achieve a green certification. After four years, the number of green buildings has increased significantly. This year, at least two buildings, Grand Terra 36 Cat Linh and Taisei Square Ha Noi, are expected to receive green certifications. By 2025, 10% of office supply is projected to achieve green certification.

In the context of increasing numbers of multinational companies and businesses focusing on sustainable values, developers focus on developing green buildings. According to Ms Mai's analysis, green projects offer numerous benefits to developers, such as contributing to sustainable environmental preservation, creating workspaces that enhance mental health, and increasing occupancy rates with tenant-centric designs. Long-term vacancy rates will decrease as tenants tend to stay with developers longer.

Green standard buildings also offer significant operational management benefits. While the initial construction cost of green offices may be higher than traditional offices, the long-term operational costs are lower.

To meet the stringent standards of green buildings, developers need to calculate factors related to building design and operation from the market research and construction phase. Basic design factors may include environmentally friendly, sustainable materials. For example, green buildings will maximise natural light, use soundproof and heat-insulating windows to reduce air conditioning’s energy consumption and use water-saving equipment.

During the operation phase, buildings must continue adhering to green standards.

Ms Vu Kieu Hanh, Director of the Property Management Department at Savills Ha Noi, emphasised, "Optimising operations and managing energy efficiency in green buildings will benefit both developers and tenants economically. Additionally, green-certified buildings contribute to environmental protection and fulfil Viet Nam's greenhouse gas emission reduction commitments at COP26."

Regarding the management and operation of green-certified buildings, Savills always adheres to energy control regulations to ensure a comfortable living and working environment for customers and residents. For example, public hand-washing taps must have a flow rate below 2 litres per minute, equipped with aerators and an automatic shut-off mode. Toilets must be equipped with either dual flush modes or an efficient single flush mode, meeting flush flow rate standards. Landscaping should prioritise drought-resistant plants and efficient irrigation systems, reuse rainwater for irrigation and comply with green sanitation policies.

Ms Vu Kieu Hanh also noted that developers need to focus on renovation activities for buildings that are already operational but wish to transition to green buildings. These activities should meet the criteria for green certification suitable for the company's development goals, such as EDGE, LEED, WELL, or BCI. Currently, most buildings in Viet Nam apply for LEED and EDGE certifications.