Hanoi Grade A office vacancy rate drops by 1.7% in 4Q21 | Real Estate Asia
, Vietnam

Hanoi Grade A office vacancy rate drops by 1.7% in 4Q21

Thanks to the strong demand for large spaces from the banking and tech sectors.

Hanoi Office welcomed Techno Park Tower, one of the most prominent launches in 2021, with the possibility to supply almost 92,000 sqm NLA (excluding internal usable space) to the market. However, JLL says the building is excluded from the REIS basket due to its location − specifically, it’s outside the REIS survey boundary, as well as its targeted tenants − technology enterprises.

According to JLL, even though the q-o-q vacancy rate was stable, the y-o-y level dropped by 1.7%. This happened thanks to the strong demand for large office space coming from banking, technology and manufacturing industries in new buildings during 2021.

Here’s more from JLL:

The lingering impact of COVID-19 on the economy as well as the accelerating number of new cases in Hanoi in the quarter hampered the demand recovery in the Grade A market. In 4Q21, net absorption was at a negative level of -700 sqm, as some tenants that were under financial pressures had to scale down their office space to cut costs.

No notable transactions were recorded in the quarter, and most of the new enquiries were targeting small- to medium-size spaces (100-350 sqm). However, JLL observed that demand for Grade A was still resilient because some tenants, especially multinational companies, were considering expansion plans that would be implemented in the following quarters.

Rent remains stable across the market

Landlords were keen on keeping rents stable. However, to support tenants and secure occupancy rates, landlords continued to offer rent incentives and flexible leasing terms such as an extended fitting-out period or lower y-o-y rent increments if tenants renewed lease contracts.

Due to the adverse impact of COVID-19 on the economy in 2021, the annual pace of rent growth was significantly lower than the pre-COVID-19 level of 5% y-o-y, at only 0.3% y-o-y in 4Q21.

Outlook: Grade A vacancy is expected to compress further

No new Grade A projects will enter the market in the next 12 months, while about five Grade B buildings are expected to come online in 2022. The vacancy rate of the Grade A market is projected to compress further, by 5.1% in 2022, with the expectation that new buildings with high vacancy will begin to fill up.

Tenants with resilient business growth, such as technology and e-commerce, will continue to be demand drivers. Furthermore, because the vaccination roll-out has been accelerated nationwide, the economy will gradually recover. Therefore, net effective rent is expected to increase to USD 27.6 per sqm per month by the end-2022, up 2.9% y-o-y.

 

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

 

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