“A Slight Dip in Demand for Office Rentals”

According to the latest data from the Ministry of Construction, there wasn’t a significant increase in the supply of new office spaces for lease across the country in Q2 2024. However, a few notable additions include the Taisei Square Hanoi, offering 45,600 sqm of space in Hanoi, and the Victory Tower Go Vap with 13,500 sqm of space in Ho Chi Minh City.

In terms of commercial space, new supply was added through projects such as Vincom Plaza Ha Giang with 21,000 sqm in Ha Giang, Vincom Plaza Dien Bien Phu with 12,000 sqm in Dien Bien, and Vincom Mega Grand Park with 50,000 sqm in Ho Chi Minh City.

Demand for office spaces witnessed a slight dip in the first half of 2024 compared to the same period last year, as businesses continue to face challenges in their operations. While the number of enterprises remained almost unchanged, their weakened production and business capabilities impacted the demand for expanding or leasing new office spaces.

On the other hand, there was a gentle increase in demand for commercial spaces compared to the end of 2023.

Average rental rates for offices and commercial spaces in Q2 2024 witnessed a slight increase of 1-3% compared to the same period in 2023. Retail spaces in street-front shops maintained stable rental rates compared to the previous quarter.

In Hanoi, rental rates for specific central areas include the Vincom Center Ba Trieu, ranging from $34 to $34 per sqm; Gelex Tower, ranging from $29.5 to $30.5 per sqm; Sun Grand City Ancora, ranging from $18 to $20 per sqm; and PVI Tower, ranging from $24 to $26 per sqm.

In Ho Chi Minh City, rental rates for premium locations include the Deutsches Haus in District 1, ranging from $65 to $68 per sqm; Saigon Centre Tower at 165 Le Loi, Ben Nghe Ward, District 1, ranging from $46 to $47 per sqm; and the Léman Luxury Apartments project, ranging from $25 to $30 per sqm.

The Hanoi market experienced a slight decrease in vacancy rates for both Grade A and Grade B office spaces. Grade A offices saw a 0.6% quarterly decrease but a 1.4% yearly increase, reaching 29.9%. Similarly, Grade B offices witnessed a 0.9% quarterly decrease but a 2.3% yearly increase, reaching 17.8%. The yearly increase is attributed to the introduction of new supply in the market.

However, the total net absorption for both grades in the first half of 2024 reached nearly 30,000 sqm, which is 50% higher than the total net absorption for the entire year of 2023, indicating a positive signal for leasing demand in the market.

In terms of leasing purposes, office relocation accounted for 86% of the total large-scale transactions recorded by CBRE in the Hanoi market. Most of these transactions aimed to move to newer, higher-quality offices with better lease terms and conditions for tenants.

This was followed by expansion purposes, making up 9%, and new leases at 5% of the total large-scale transactions. The key industries driving these transactions were Finance/Banking/Insurance, accounting for 46%, and Information Technology, accounting for 14% of the total large-scale transactions recorded by CBRE.

After a relatively abundant supply in 2023, the office market is starting to feel the heat of competition from these high-quality options. In the second half of 2024, new office supply is expected to continue to grow, creating favorable conditions for tenants.