HCMC, 25th September 2014, Cushman & Wakefield in Vietnam releases its Office Market Beat Quarter 3 2014. After a quarter with new entry of grade B office buildings, the market Q3 2014 continues to welcome more supply coming on board.
Hanoi witnessed the market entry of one significant Grade A project (Lotte Center – the second largest leasable area among grade A buildings) and one Grade B building (Ho Guom Plaza). Total office space in Hanoi was raised to 1,113,000 square meters (sq.m), representing an increase of 5.3% quarter-on-quarter. In Ho Chi Minh city in Q3 2014, no new office buildings for either grade entered the market. However, a slight increase of 400 sq.m quarter-on-quarter in grade B stock recorded due to the extension of one existing building in the CBD. Currently, Ho Chi Minh city has a total of 9 grade A and 48 grade B office buildings, providing 157,000 sq.m. and 664,370 sq.m. of space respectively. However, this number is expected to increase due to the upcoming Le Meridien delivery in end of year and Vietcombank Tower which is in the process of targeting handover in Q1 2015.
The average asking rent for grade A in CBD Hanoi recorded a slight decrease of 0.8% over the quarter. Whereas, grade A in non-CBD Hanoi increased 9.9% quarter-on-quarter in terms of average asking rent rate due to the significantly higher than average asking rent offered by Lotte Center. With more and more grade B supply entering the market, the average asking rent rate of grade B office in Hanoi continued to decline by 1.7%. On the other story, average rent of both grades in Ho Chi Minh city remained stable quarter-on-quarter, but increased slightly by some 2% year-on-year for Grade A and 1% for Grade B.
In terms of occupancy, the occupancy rate across all grades in Hanoi saw a decrease this quarter. Grade A showed the decline of 7.8% while grade B recorded a drop of only 0.8% quarter-on-quarter. In contrast, occupancy of both grades in Ho Chi Minh city continued to improve year-on-year, with grade A’s occupancy reaching 92%, while Grade B’s standing at around 93%.
In Q3 2014, C&W represented Kuehne + Nagel to become one of the first, and likely largest occupiers of Sunny Towers. Expecting an eventful second half of the year with some key transactions to happen, Alex Crane, National Head of Tenant Advisory Group, Cushman & Wakefield Vietnam commented “With the pressure of good incentives from this significant new supply, the ‘old guard’ of mature buildings will soon feel more stress. We are to see some price correction within the mature buildings to match the pricing strategies of the new supply and also those newer buildings released in the last three years. For the remainder of the year at least, rents are expected to remain stable. The impact of the ongoing free trade agreements is yet to be seen but we remain hopeful that new tenants will enter the market in the near future.”