What’s driving office occupier demand in Vietnam?

Large transactions of up to 1,000sqm are keeping the market alive.

Unfazed by another wave of the pandemic, the Grade A office market in Hanoi, Vietnam recorded positive net absorption of around 6,000 sqm NLA in the second quarter of 2021. JLL says this pushed up the occupancy rate to 80.7%.

“Large transactions (around 500-1,000 sqm) from technology, e-commerce, construction and chemical companies drove the majority of the demand. Shopee’s office expansion at Capital Place with approximately 2,000 sqm of floor space is one of the most notable transactions in the quarter,” the analyst said.

Here’s more from JLL:

The resurgence of COVID-19 disrupts the launch of new supply

Due to the fourth wave of COVID-19 in Hanoi, the launch date of some new projects in 2Q21 has been pushed back to the following quarters. Therefore, the Hanoi office Grade A market stayed quiet with no new launches.

In 2Q21, the Grade A vacancy rate fell by 103 bps q-o-q to 19.3%, mostly thanks to strong take-up in new buildings such as Capital Place and Thai Holdings. Most longstanding buildings, except for Lotte Center Hanoi and TNR Tower Nguyen Chi Thanh, have maintained their current level of occupied space.

Rents remain stable

Grade A average net rent remained constant at USD 26.8 per sqm per month in 2Q21. This was due to the complicated development of COVID-19 which led tenants to tighten their budgets. The majority of existing buildings either kept their asking rents constant or decreased them slightly.

In addition, landlords of those buildings with large vacant spaces continued to offer rental incentives and flexible rental terms to attract new tenants during this challenging period.

Outlook: One notable project to enter the suburban area

Around 117,000 sqm NLA from Gia Lam’s Techno Park Tower will enter the market in 2H21. Despite its unconventional location (outside of our tracked supply boundary), Techno Park Tower will set a new standard for the Hanoi office market with its LEED Platinum certification.

Without taking Techno Park into analysis, the average rent is expected to remain stable until the end of the year, owing to a combination of an expected future recovery in demand and competition from new Grade B buildings.

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