APPD Market Report Article

Hanoi

May 26, 2024

Trang Le, Head of Research, Vietnam

-0.9%

USD 32.7

Rents
Stable

Hanoi Grade A office market resilient in 1Q24

  • Hanoi’s Grade A office market proved its resilience in 1Q24, with the CBD submarket leading the charge. The CBD recorded a positive net absorption of 2,500 sqm, underscoring the healthy demand for high-quality office space in the heart of the city.
  • The non-CBD submarket saw 2,000 sqm less absorption in 1Q24, suggesting that the area is still in the process of attracting tenants and filling available space. However, the absorption rate is expected to gain momentum in the coming quarters as new projects establish themselves and capitalise on the growing demand for decentralised office locations.

No new additions to Grade A office supply

  • Hanoi’s Grade A office market saw no new additions in 1Q24, with the total supply remaining stable at around 521,800 sqm. The highly anticipated Grand Terra, formerly known as 36 Cat Linh, has reached completion but is currently in the process of obtaining the necessary permits before officially launching into the market.
  • In 1Q24, Hanoi’s office market showed resilience amidst economic uncertainty, with the overall vacancy rate decreasing to 21.4% from 22.3% in the previous quarter. The CBD Grade A office vacancy rate declined to 24.6%, while the non-CBD submarket experienced a drop from 16% to 14.7%, highlighting the growing appeal of decentralised office locations.

Landlords maintain rents to attract tenants amid uncertainty

  • In 1Q24, the CBD submarket witnessed a q-o-q increase of 1% in its Grade A net effective rent, reaching USD 32.7 per sqm per month. This growth, albeit modest, was driven by landlords’ efforts to maintain steady rents amidst macroeconomic uncertainty, as they sought to attract and retain tenants in prime office locations within the CBD.
  • The non-CBD submarket saw a stable Grade A net effective rent of USD 23.5 per sqm, per month in 1Q24. This stability was attributed to new projects in the area offering higher-than-average asking rent while providing attractive incentives to entice tenants and fill vacant spaces, ensuring steady demand despite challenging economic conditions.

Outlook: Hanoi Grade A office market to remain resilient

  • Green development is a key focus in Hanoi’s office market, with all pipeline buildings having green ambitions and existing buildings seeking green certifications. Despite the delay, Grand Terra in the CBD is expected to open this year, bringing the total CBD Grade A office supply to around 367,100 sqm by end-2024.
  • The CBD is poised for a modest uptick in rents, largely driven by the anticipated premium pricing at Grand Terra, which is set to raise the bar for Grade A office space. While the non-CBD submarket is also forecast to witness a rise in Grade A office net rents, the growth is likely to be tempered by the steady influx of new supply that will intensify competition among landlords.

Note: Hanoi Office refers to Hanoi's Grade A office market.

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