Total supply reached about 1.8 million square metres, stable on-quarter, but up year on-year, with most new projects in the centre or the West. Post-pandemic, the Hanoi office market is expected to bounce back quicker than Asian peers.
Covid-19 continues to block overseas occupiers seeking office space in Vietnam. Existing tenants who rented pre-pandemic have trimmed back operations, cut costs, with some exiting leases. Second quarter leasing has slowed but developers have been flexible with policies such as preferential terms, free service, rental reduction, and increased rent free periods. Many tenants have relocated to lower rent space. Serviced office use has increased over the pandemic.
Mr. Le Tuan Binh, Savills Hanoi Head of Commercial Leasing, said: “Hanoi is still an attractive and stable market compared to regional cities where office rates especially Grade A, are sharply down. In ASEAN, Hanoi down just 1% over last year with 94% occupancy, is only behind Singapore & HCMC. This indicates strong post-pandemic recovery potential”.
According to Mr. Binh, the market needs greater appreciation of both the landlords and tenants position, such as occupiers committing to a longer lease term will ensure occupancy while sharing risk with landlords.
Mr. Binh shared: “Rental policy adjustments from landlords have created more favourable conditions for tenants negotiating lease agreements. However, tenants also need to pay special attention to relevant legal procedures”.
Tenants need to know the situation in their target area, as average lease rates, occupancy and supply all vary. Knowing this will help tenants decide if that area suits their needs. When negotiating a new lease, a thorough understanding of contract procedures is essential. It is advisable to secure precisely what is required during contract negotiations or subsequent problems will arise.
Hanoi will continue attracting significant FDI with the Government determined the capital city leads post-pandemic recovery in Viet Nam. Free Trade Agreements coming into effect, including the Vietnam - European Union Free Trade Agreement (EVFTA), will accelerate Ha Noi Office recovery and development. The most resilient sectors throughout the pandemic are from: E-commerce, Finance, Banking, Logistics, and Information Technology, with most recording growth.
Vietnam remains the favoured investment destination in Asia over the long term.