Choosing a location for your business

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Looking at the picture of Hanoi Office Leasing Market, the vast development of a new Central Business District in the far west of Hanoi creates a trend where businesses start to relocate their offices to a newer, considerably cheaper rent office building. However, corporate occupier need to take into consideration the fact that employees may have to travel longer distance to get to work, yet they bear higher price lunches, construction’s dust, and constant traffic jam.

This creates concern to all businesses. Dong Da District and Ba Dinh District have the most population of Hanoi. Office rent is considerably lower than the CBD and not that much of a different than the new CBD. The office area total of 2 districts for Grade A & B is around 227,000 sq m (93,000 sq m in Ba Dinh and 134,000 sq m in Dong Da). These buildings locate in the transhipment zone between CBD and New CBD. Therefore, transportation in this area is also very convenient, not to mention that, these long established districts have their reputation for its environment and a stable cost of living.

As far as floor plan layout is concerned, it is intended to maximise the tenant’s flexibility – maximising usable floor space, while minimising circulation space. Regular shaped floor plates provide tenants with an efficient layout to design their space. In addition, in the event that a Landlord has to split a floor, meaning multiple tenants occupy 1 floor; regular shapes (e.g. rectangle) make it easy to divide floors into different areas.

As for building facilities, we would like to highlight the important of elevators, basements, air-con System, WC equipment and finishing materials, which show the outcome of the lifespan of the building in long term. It is not uncommon to see tired looking WC’s in old buildings and the impatience face of worker waiting for elevators. Landlords need to take action to refurbish their buildings as and when required. The management of this can be extremely important as it can affect the occupancy of the building. If the tenants aren’t happy with the look and feel of the building there is a high chance they could leave at the end of their tenancy.

Electrical design of any system is required to cover for all demand of users. Office building in precise requires a very reliability power distribution system because of the critical nature of some of the systems supplied and the high costs associated with failures. For example loss of power to an air traffic control installation or power loss to a computer data processing system can incur high costs due to loss of data and long recovery periods. The larger the computer system, the longer will be the recovery period after a power supply disruption and resulting in lost production time and wage costs. Due to market supply is exceeding demand in Vietnam market, in order to reduce the cost of investment; developers choose to reduce the investment of the standard equipment such as backup power system/air conditioning system by switching to another brand with lower quality, or redesign to reduce the electrical capacity. This happens to almost the buildings, even the grade A office building in the centre.

Another matter is legal issue which seems to be of rising concern for corporate tenants since some building owners have payment issue or bad debt with the third party. Deciding on which building to lease is an important decision as the relationship between the Landlord and the Tenant generally spans over many years. To mitigate the risk of choosing an unreliable Landlord tenants take a number of steps including choosing a Landlord with a good reputation and existing track record of developments, performing due diligence of the financial standing of the Landlord and negotiating the lease in such a pay that provides the Tenant to terminate the lease in the event the Landlord fails to full fill their obligations.

Tenant Representation is a service which is generally used by multinational organizations operating in Vietnam. These companies have high expectations as they operate in many different markets which are often more developed that Vietnam. There is sometimes a void between what a multinational tenant is comfortable with and what a Landlord sees as acceptable. In almost every example the solutions is a compromise, the tenant has to be flexible and understand the market practice in Vietnam, equally the Landlord in some circumstances has to accept certain ‘Organizational Corporate Standards’ which tenants can compromise on. This can often be frustrating for both sides, however a Tenant Representative is on hand to help the tenants to navigate their way through any potential pitfalls.

Article in Vietnam Investment Review

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