Hanoi CBD office vacancy rate to reach 25.7% by year-end

This is driven by the upcoming new supply of 64,000sqm.

For the remainder of 2023, a report by JLL said Grade A vacant space in Hanoi’s CBD is expected to jump to 25.7% at the end of 2023, given the abundant new supply of about 64,000 sqm from Diamond Park Plaza, Lotte Mall Tay Ho and 36 Cat Linh, coupled with weakening absorption.

The report said that by the end of 2023, average rent in the CBD is expected to be restrained due to the decline in rental demand, despite all the new supply coming from high-quality buildings. Meanwhile, existing buildings should continue to retain tenants with rent stabilisation policies and other incentives.

Here’s more from JLL:

The Grade A market in the CBD recorded a net absorption of about 5,300 sqm, up 6.7% q-o-q but down 25.6% y-o-y. Favourable fiscal policies as well as the extension of the tax payment date and the reduction of value-added tax policies for businesses in 2Q23 has helped to reduce financial pressure in the short term, but it is still insufficient to revive tenant sentiment in the quarter.

The expansion of multinational companies in two LEED-certified Grade A buildings in the CBD, namely Capital Place and Lancaster Luminaire, helped to drive net absorption. However, tenants have begun to reevaluate their rental budgets, resulting in a trend of relocation from Grade A to Grade B buildings that offer more reasonable prices, especially for domestic companies.

No new Grade A supply; vacancy rate remains high

No new Grade A supply was recorded in 2Q23. Diamond Park Plaza is now in its fitting-out stage, and has started offering leases on some floors. It is expected to open in 3Q23. Total Hanoi Grade A office supply stayed at around 471,700 sqm, with nearly 70% of the total NLA in the CBD.

Grade A office vacancy in Hanoi remained high, at about 79,000 sqm or 16.8% occupancy rate in 2Q23, much higher compared to the vacancy rate of 5.9% recorded in Ho Chi Minh City. The high vacancy rate in the Hanoi Grade A office market was mainly due to the abundant new supply during the 2020–2023 period.

Buildings offer rent reductions and maintain stable rents

Net effective rent in the CBD decreased slightly by 1.6% q-o-q, to USD 33.4 per sqm, per month, mainly due to rent adjustments in good-quality buildings with high asking prices to attract new tenants amid subdued demand. Meanwhile, asking rents in long-standing buildings with high occupancy rates were stable as leasing activities at these sites were mainly renewal contracts.

No investment transactions were recorded, apart from Techcombank which sold its old headquarters at Vincom Ba Trieu to Vingroup for USD 75 million. Capital value decreased slightly by 1.1% q-o-q but kept its y-o-y growth rate of 4.4%. 

Note: Hanoi Office refers to Hanoi's Grade A office market.