APPD Market Report Article


September 4, 2023

Trang Le, Head of Research, Vietnam


USD 32.4


Demand declines y-o-y, especially among domestic tenants

  • The Grade A market in the CBD recorded a net absorption of about 5,300 sqm, up 6.7% q-o-q but down 25.6% y-o-y. Favourable fiscal policies as well as the extension of the tax payment date and the reduction of value-added tax policies for businesses in 2Q23 has helped to reduce financial pressure in the short term, but it is still insufficient to revive tenant sentiment in the quarter.
  • The expansion of multinational companies in two LEED-certified Grade A buildings in the CBD, namely Capital Place and Lancaster Luminaire, helped to drive net absorption. However, tenants have begun to reevaluate their rental budgets, resulting in a trend of relocation from Grade A to Grade B buildings that offer more reasonable prices, especially for domestic companies.

No new Grade A supply; vacancy rate remains high

  • No new Grade A supply was recorded in 2Q23. Diamond Park Plaza is now in its fitting-out stage, and has started offering leases on some floors. It is expected to open in 3Q23. Total Hanoi Grade A office supply stayed at around 471,700 sqm, with nearly 70% of the total NLA in the CBD.
  • Grade A office vacancy in Hanoi remained high, at about 79,000 sqm or 16.8% occupancy rate in 2Q23, much higher compared to the vacancy rate of 5.9% recorded in Ho Chi Minh City. The high vacancy rate in the Hanoi Grade A office market was mainly due to the abundant new supply during the 2020–2023 period.

Buildings offer rent reductions and maintain stable rents

  • Net effective rent in the CBD decreased slightly by 1.6% q-o-q, to USD 33.4 per sqm, per month, mainly due to rent adjustments in good-quality buildings with high asking prices to attract new tenants amid subdued demand. Meanwhile, asking rents in long-standing buildings with high occupancy rates were stable as leasing activities at these sites were mainly renewal contracts.
  • No investment transactions were recorded, apart from Techcombank which sold its old headquarters at Vincom Ba Trieu to Vingroup for USD 75 million. Capital value decreased slightly by 1.1% q-o-q but kept its y-o-y growth rate of 4.4%. 

Outlook: New supply faces rent pressure due to low demand

  • For the remainder of 2023, Grade A vacant space in the CBD is expected to jump to 25.7% at the end of 2023, given the abundant new supply of about 64,000 sqm from Diamond Park Plaza, Lotte Mall Tay Ho and 36 Cat Linh, coupled with weakening absorption.
  • By the end of 2023, average rent in the CBD is expected to be restrained due to the decline in rental demand, despite all the new supply coming from high-quality buildings. Meanwhile, existing buildings should continue to retain tenants with rent stabilisation policies and other incentives.

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

Talk to us 
about real estate markets.