Vietnam Real Estate News

Office market tipped to cool even further   2009-08-09 - VIR

The door is open to tenants seeking favourable rental agreements from landlords.

Nathan Cumberlidge, head of Colliers International’s Market Research and Valuation Department, said that in line with Vietnam’s stuttering economy, office rentals in Hanoi had dropped 15 to 20 per cent since the beginning of the year on new deals and lease renewals.

“The market’s recovery is predicted to last until early 2010. However, the high supply pipeline for this year may result in either static or reduced rentals and lower occupancy rates,” Cumberlidge predicted. The current average grade A rentals in Hanoi’s Hoan Kiem district were approximately $50 per square metre, down from more than $60 in previous years. However, tenants could secure more favourable terms on lease renewals with landlords who were keen to maintain their occupancy rates.

Jones Lang LaSalle reports Ho Chi Minh City’s office market was also in a downturn and had experienced the greatest fluctuations of any sector over the past 24 months. “This trend has also been repeated in other Asian cities, including Singapore, where grade A rents have fallen by almost 60 per cent in the past year,” the company said in a statement.

“The magnitude of decline will depend on the extent of growth in the previous upturn and in the supply and demand balance of each market. As such, we expect further declines in office rentals in Ho Chi Minh City through the end of 2009. In the first quarter of 2007, grade A rents on average stood at just $40 per square metre, per month,” said Andrew Brown, country head of Jones Lang LaSalle.

“This is supported by increasing levels of supply and the total stock vacancy rate, which is now in excess of 10 per cent. Twelve months ago this figure was negligible,” Brown added. Another real estate consultant, CB Richard Ellis Vietnam (CBRE), said that the office market in Ho Chi Minh City had finally seen tenants beginning to sign leases.

“Landlords from established properties have begun to resist downward rental pressures, while landlords from new buildings must still offer incentives to attract tenants. Enquires are increasing, but are predominately for spaces from 100-300sqm,” the company said in a statement. According to CBRE, total grade A offices in Ho Chi Minh City increased by 34,426, or 35 per cent, in the second quarter of the year, while net absorption was only 3,744sqm.

The company also predicted that around 195,000sqm were expected to be launched over the next 12 to 18 months, so tenants were holding off for more choices. Landlords with breakeven occupancy rates would want stable prices, while new landlords would continue to face the pressures of decreased rents, the company said.

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