APPD Market Report Article
HanoiDecember 1, 2021
Negative net absorption clouds the market
- The strict social-distancing measures imposed in response to the resurgence of COVID-19 has dampened the demand for the Hanoi Grade A office market. Negative net absorption of -1,100 sqm clouded the market in 3Q21. This was as a result of some tenants in long-standing buildings downgrading or downsizing.
- While performance in the technology sector has been resilient with many expansions observed in the last few quarters, energy firms have emerged as one of the most notable demand generators in the quarter. Both industries recorded large transactions at around 1,000 sqm each.
No new completions enter the market
- No new supply in Grade A was recorded in the quarter. The strict social-distancing measures have put the construction progress of one notable project in Gia Lam District and some new Grade B projects on hold. Hence, the expected opening dates of these projects have been delayed further.
- Due to the low demand during the outbreak, vacancy increased marginally to the 3Q20 level of 19.5% as old projects struggled to retain their tenants who tended to relocate to Grade B buildings or downsized to cut costs.
Rent remains stable across the market
- Landlords were firm on keeping rents stable. However, in order to support tenants and secure the occupancy rate, landlords still offered some rental incentives and flexible rental terms such as free parking spaces or lower contractual escalation of rental rates if tenants renewed the lease contract during this period.
- Yields have been modestly compressed as a result of investors’ strong confidence in the market outlook, despite the uncertainty of the global economy and the fact that the pandemic has not been totally contained. Capital value increased by 2.0% q-o-q, growing at the same pace as the previous quarter.
Outlook: Rent remains stable
- In early 4Q21, Hanoi will welcome around 117,000 sqm NLA from Techno Park Tower in a suburban district called Gia Lam. The average rent is expected to stay stable until end-2021. It should be highlighted that, owing to the unconventional location and its specific target tenant, this building will not be included in our basket of tracked supply.
- Tenants in most trending industries, such as technology and e-commerce, will continue to be demand drivers in the market.