Starting with the Office Market, Cushman & Wakefield have witnessed a number of key occurrences. Rents continue on a downward trend, as has been the case ever since the financial crisis at the end of 2008, and this is expected to continue for the foreseeable future. Average rents for Grade A & B are VND 660,000 ($32) per sqm per month and VND 400,000 ($20) per sqm per month respectively (VAT excluded, service charge included). A slight decrease in the occupancy rate of Grade A has been witnessed, standing at 72% while the occupancy of Grade B remained stable (78%). Significant projects coming online in 2013 include EVN Tower (45,000 sqm) and Eurowindow MultiComplex (14,000 sqm).
For now, Tenants can expect good cost savings and lease flexibility, and the ability to upgrade offices on a cost efficient basis. It is advised that Tenants use this great window of opportunity in the rental cycle to their advantage. It is important for Landlords to be both proactive and flexible at this moment in time to attract and retain key Tenants.
In the retail market there have been a number of significant changes in recent times. A number of new retail developments have been suffering from high vacancy. Grand Plaza, a significant retail centre, has been closed due to low occupancy and Pico Mall has been re-introduced under the name Mipec Tower. The market observed the entrance of high-end brands such as Dior, Raulph Lauren, Ermenegildo Zegna, Breguet and the fast and strong penetration of F&B brands especially fast-food such as Burger King, Popeyes, Dunkin Donuts. Total retail space has reached approximately 700,000 sqm in Hanoi with 73 supermarkets, 19 electronic marts, 2 wholesale markets, 3 hyper markets, 18 shopping centers and department stores, 17 retail podiums. In the coming years, Ha Dong and Thanh Xuan will have the largest cumulative supply totalling approximately 600,000 sqm; accounting for approximately 50% of new supply in Hanoi. By end of this year, Vincom Mega Mall Royal City - one of the largest scale retail projects is expected to be completed and will add to the retail market 230,000 sqm.
For retailers, now is the time to target more on commercial brands and mass products to match with the market demand. For investors, good market research and consumer insight study is crucial. Providing top facilities and ensuring a prime location is also the key to success in Hanoi.
The Serviced Apartment sector of the Residential Market has seen a recent increase in supply, as Dolphin Plaza and My Way have been introduced. Although Tay Ho district is the most popular area for expatriates – the main occupiers of serviced apartments – the West of Hanoi has emerged as a new hotspot for development. Rents for Grade A & B are approximately VND 680,000 per sqm per month ($32) and VND 407,000 ($19.5) per sqm per month respectively.
Grade A maintained occupancy rates of 83%, an increase of 6% in comparison with the previous quarter. Lunar New Year might have impacted on expatriate relocations and can explain the increase in occupancy. Meanwhile, Grade B’s occupancy rate stood at 79%, a decrease of 12% in comparison with that in Q4 2012 due to additional supply entering the market. Both rents and occupancy are set to follow a downward trend as more supply comes into the market.
With an influx of new supply in the future, it is predicted that it will remain a Tenant’s market until 2015.