How this new building made an impact on Hanoi’s office market
It had a significant contribution to the city’s high net absorption in Q4 2022.
A recent JLL report said that the new owner-occupied building, Techcombank Tower, contributed significantly to Hanoi’s high net absorption of about 23,700 sqm NLA.
Without this building, the Hanoi Grade A office market would have recorded a net absorption of only about 4,400 sqm NLA, lower than the previous quarter. Most leasing activities in 4Q22 were for renewal purposes.
Here’s more from JLL:
CBD maintained its positive net absorption trend from the previous quarter. Meanwhile, the vacancy rate in non-CBD buildings increased slightly, by 0.8%, due to strong competition from nearby Grade B buildings. All notable transactions took place in the CBD, including new set-ups in Pacific Place and one tenant relocating to Capital Place.
Total supply increases with one owner-occupied building completed
Techcombank Tower was scheduled to open by the end of December 2022. Originally, more than 8,000 sqm of the building was intended for lease, but the developer has decided to keep the entire 19,247 sqm for internal use. Although the total Grade A stock in the Hanoi office market increased to about 575,400 sqm NLA, the active basket remained unchanged.
The vacancy rate in the Hanoi Grade A office market in 4Q22 was 14.4%, down 1.3% q-o-q and 5.2% y-o-y, mostly due to strong take-up in Capital Place. However, this building was only half-occupied and accounted for up to 60% of the total 83,000-sqm vacant space in the market.
Rents increase slightly, driven by higher rent in Capital Place
Net effective rent for Hanoi Grade A offices reached USD 28.5 per sqm per month, up 0.48% q-o-q and 6.2% y-o-y. The slight increase in price was due to the rise in rents at Capital Place, with an increase of 0.8% q-o-q.
Indochina Plaza Hanoi’s net effective rent decreased by 0.2% q-o-q as the building is under renovation. Other buildings with high occupancy rates tended to keep their rent prices stable as there was limited pressure to fill up the remaining vacancy.
Outlook: A cautious outlook for 2023 is expected
In 2023, new supply of 93,000 sqm is expected from four new buildings. Lotte Mall Hanoi reduced its office space from 43,000 sqm to 20,000 sqm to make room for hotel and serviced apartment components. BIDV Tower will no longer be leased, instead converting into an owner-occupied office building. By end-2023, total supply will be around 668,800 sqm NLA, with around 629,600 sqm NLA of active supply.
New completions will temporarily raise the market vacancy rate to 23.2% by the end of 2023. In the face of a challenging macroeconomic outlook, net absorption was adjusted to 21,000 sqm, a decrease from the forecast in 3Q22. Given the expected new supply and weakened demand, the overall asking rent was adjusted to rise by only 1.2% y-o-y, lower than the forecast in 3Q22.
Note: Hanoi Office refers to Hanoi's Grade A office market.