Rents on the Hanoi office market are expected to also remain stable as there are limited prime projects coming until 2023. (Photo: VNA)Hanoi (VNS/VNA) - The office market in Hanoi is experiencing manychanges amid the COVID-19 pandemic in terms of rental prices, occupationalprofile and new demands for office spaces, according to Savills Vietnam.
Grade A rents in Hanoi are predicted to be stable in the upcoming year. Withthe Capital Place project in the secondary area entering the market, totalgrade A supply in Hanoi reached about 90,000 sq.m in the first half of thisyear, up 24 percent year on year while the average rent was up 7 percent yearon year.
As take up has been stable over the past three years, it will take some timefor this volume of space to be absorbed. Rents are expected to also remainstable as there are limited prime projects coming until 2023.
In 2021, the Information and Communication Technology (ICT) sector as well asindustries such as manufacturing, finance, banking and insurance are expectedto grow.
Hoang Nguyet Minh, Director of Commercial Leasing, Savills Hanoi, said: “Withthe incredible growth rate of ICT or e-commerce enterprises, the office spacefor rent may currently remain only 1,000 sq.m but may double in size in thenext three years. Therefore, the required space can double or even triple.”
“In the case occupiers want to expand and their business sector has a very goodgrowth rate, landlords need to provide support in terms of spaces or rentalpackages to help the occupiers further expand, avoiding circumstances wherethere is not enough space for expansion, meaning occupiers have to look forother suitable space."
Rents are not the main priorities of occupiers, rather they now have morerequirements for the location of their headquarters, the quality of theconstruction, services that will be provided, as well as whether the buildingspace can meet the demand for future expansion, according to Savills.
In Hanoi, companies now focus more on flexible and people-centric officedesign, creating space for interaction and collaboration.
In the pre-pandemic period, office design focused on the efficient use of spacewith high work density. Grade B or C office buildings can have a work densityof 4-6 sq.m per staff member whereas it is 10 sq.m per employee in Grade Abuildings, Minh said.
However, as most office workers have adapted to working remotely amid thepandemic, it is necessary to reconsider the workspace density to better suitneeds. For example, a company with a scale of 100 staff may only need toarrange workspace for 60-70 staff and others can work remotely. Companies mayconsider other amenities such as pantries or more meeting rooms.
Besides that, “Due to the changes in the way of approaching and constructingoffices, investors are also expected to become more flexible with rentalpackages. Office leasing terms normally last three years,” Minh said.
“However, occupiers recently want longer-term contracts, lasting five to sevenyears, or even up to 10 years. In addition, the rental price of these contractsis also seeing significant changes.”
For instance, at the moment, occupiers have the tendency to expect a lower rentin the first year, and by the third or fourth year the rent will increase againto make up for the discounted rent at the beginning. The first purpose behindthis trend is to support the occupiers during the pandemic. The second is toensure a long-term rental commitment between occupiers and owners.
Office property is still considered the most stable sector as occupiers oftenrent and use the space as their representative offices or company branches witha relatively long rental period, Minh said.
Savills also reported that many companies are considering a shift to hybridworking – a mixture of office and remote working.
The pandemic has changed people’s working lives and the office market. Mostworkers want to be in the office at least some of the time, and most firms wanta degree of attendance to ensure mentorship for newer and younger employees andto boost creativity, collaboration and productivity.
However, some roles such as banking will continue to need traditional officesfor oversight and scrutiny, which can only take place in an office environment.
Troy Griffiths, Deputy Managing Director of Savills Vietnam, said: “Influencesof demand change quickly in a dynamic business environment, such as Vietnam.With Ho Chi Minh City’s recent rapid growth in finance, insurance, real estateand ICT industries then the formal office occupiers will continue to requirehighly functional and pleasing space to satisfy the young workforce."
"However, with a recent long lockdown, and with solid growth in small andmedium sized enterprise (SME) forecast then the traditional office models willbe challenged, thereby promoting more flexible hybrid offices.”
Vietnam has a strong SME base and a very active start-up environment. Theseusers do not typically take formal office space and so co-working space hasgrown extensively. As these occupiers’ businesses mature then they will requireformal office space and therefore increase demand, that may be best satisfiedwith hybrid models, Troy said./.
Grade A rents in Hanoi are predicted to be stable in the upcoming year. Withthe Capital Place project in the secondary area entering the market, totalgrade A supply in Hanoi reached about 90,000 sq.m in the first half of thisyear, up 24 percent year on year while the average rent was up 7 percent yearon year.
As take up has been stable over the past three years, it will take some timefor this volume of space to be absorbed. Rents are expected to also remainstable as there are limited prime projects coming until 2023.
In 2021, the Information and Communication Technology (ICT) sector as well asindustries such as manufacturing, finance, banking and insurance are expectedto grow.
Hoang Nguyet Minh, Director of Commercial Leasing, Savills Hanoi, said: “Withthe incredible growth rate of ICT or e-commerce enterprises, the office spacefor rent may currently remain only 1,000 sq.m but may double in size in thenext three years. Therefore, the required space can double or even triple.”
“In the case occupiers want to expand and their business sector has a very goodgrowth rate, landlords need to provide support in terms of spaces or rentalpackages to help the occupiers further expand, avoiding circumstances wherethere is not enough space for expansion, meaning occupiers have to look forother suitable space."
Rents are not the main priorities of occupiers, rather they now have morerequirements for the location of their headquarters, the quality of theconstruction, services that will be provided, as well as whether the buildingspace can meet the demand for future expansion, according to Savills.
In Hanoi, companies now focus more on flexible and people-centric officedesign, creating space for interaction and collaboration.
In the pre-pandemic period, office design focused on the efficient use of spacewith high work density. Grade B or C office buildings can have a work densityof 4-6 sq.m per staff member whereas it is 10 sq.m per employee in Grade Abuildings, Minh said.
However, as most office workers have adapted to working remotely amid thepandemic, it is necessary to reconsider the workspace density to better suitneeds. For example, a company with a scale of 100 staff may only need toarrange workspace for 60-70 staff and others can work remotely. Companies mayconsider other amenities such as pantries or more meeting rooms.
Besides that, “Due to the changes in the way of approaching and constructingoffices, investors are also expected to become more flexible with rentalpackages. Office leasing terms normally last three years,” Minh said.
“However, occupiers recently want longer-term contracts, lasting five to sevenyears, or even up to 10 years. In addition, the rental price of these contractsis also seeing significant changes.”
For instance, at the moment, occupiers have the tendency to expect a lower rentin the first year, and by the third or fourth year the rent will increase againto make up for the discounted rent at the beginning. The first purpose behindthis trend is to support the occupiers during the pandemic. The second is toensure a long-term rental commitment between occupiers and owners.
Office property is still considered the most stable sector as occupiers oftenrent and use the space as their representative offices or company branches witha relatively long rental period, Minh said.
Savills also reported that many companies are considering a shift to hybridworking – a mixture of office and remote working.
The pandemic has changed people’s working lives and the office market. Mostworkers want to be in the office at least some of the time, and most firms wanta degree of attendance to ensure mentorship for newer and younger employees andto boost creativity, collaboration and productivity.
However, some roles such as banking will continue to need traditional officesfor oversight and scrutiny, which can only take place in an office environment.
Troy Griffiths, Deputy Managing Director of Savills Vietnam, said: “Influencesof demand change quickly in a dynamic business environment, such as Vietnam.With Ho Chi Minh City’s recent rapid growth in finance, insurance, real estateand ICT industries then the formal office occupiers will continue to requirehighly functional and pleasing space to satisfy the young workforce."
"However, with a recent long lockdown, and with solid growth in small andmedium sized enterprise (SME) forecast then the traditional office models willbe challenged, thereby promoting more flexible hybrid offices.”
Vietnam has a strong SME base and a very active start-up environment. Theseusers do not typically take formal office space and so co-working space hasgrown extensively. As these occupiers’ businesses mature then they will requireformal office space and therefore increase demand, that may be best satisfiedwith hybrid models, Troy said./.
VNA
