APPD Market Report Article

Hanoi

November 29, 2022

Trang Le, Head of Research, Vietnam

5.7%

USD 28.3

Growth
Slowing

Capital Place drives 3Q22 net absorption

  • Net absorption continued to increase, reaching about 7,000 sqm (NLA) in 3Q22, driven by large absorption in the Capital Place building. Capital Place reported the most notable leasing transactions, such as the 700-sqm office of Lazada and the relocation coupled with expansion of a services firm.
  • Office buildings in the non-CBD area recorded an increase in vacancy as some of the buildings were older and no longer fit tenant requirements. Tenants tended to choose other new Grade B buildings in the vicinity, which had much lower rents.

Only Techcombank building is scheduled to open in 2022

  • There was no new supply of Grade A buildings coming online in 3Q22. The Hanoi Grade A office market is expected to welcome Techcombank Tower, scheduled to open by the end of 2022. On the other hand, due to issues faced during construction, Lancaster Luminaire will be delaying its launch to the beginning of 2023.
  • The vacancy rate in the Hanoi Grade A office market recorded 15.7% in 3Q22, a decrease of 1.3% q-o-q and 3.7% y-o-y, mostly due to strong take-up in Capital Place. Meanwhile, most long-standing buildings continued to maintain their vacancy levels. It is estimated that there are 7 out of 20 active Grade A buildings that could offer more than 1,500 sqm (NLA) vacant space in 3Q22.

Capital Place pushes up overall rents

  • Capital Place, the first LEED-certified Grade A office building in Hanoi, had been increasing rents after achieving a sufficient occupancy rate, and this helped to push up the average rent in the Hanoi Grade A office market to USD 28.3 per sqm per month, an increase of 1.2% q-o-q and 5.7% y-o-y.
  • On the other hand, International Centre has decreased its asking rental price by 15% for office space on the 2nd and 3rd floors, to fill vacancy.

Outlook: A new wave of supply is expected in 2023

  • The Hanoi office market should be welcoming 19,247 sqm (NLA) from Techcombank Tower in 4Q22, bringing total stock to about 575,400 sqm (NLA). 60% of the space in this building is reportedly for owner-use. Net absorption in 4Q22 is expected to be strongly driven by the new completion. A wave of new supply should be incoming in 2023, with four new buildings in both the CBD and non-CBD areas.
  • Given high expectations for the Techcombank building, rental value is projected to increase by 1.2% q-o-q in 4Q22. In 2023, this is expected to increase by 3.6% y-o-y due to the introduction of high-quality new supply. In the meantime, landlords in existing buildings are likely to maintain stable rents to keep their tenants, in the midst of a very competitive market.

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

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