Hanoi Grade A office rents to grow by less than 1% by year-end

And vacancy is expected to rise significantly. 

By the end of 2023, JLL expects Hanoi office vacancy to increase significantly with the completion of 43,462 sqm from Diamond Park Plaza and 36 Cat Linh. The continued supply influx could further intensify competition amid weaker demand due to economic uncertainties. 

To stay competitive, JLL says owners of long-standing buildings have to reassess their position and consider upgrades, repositioning and improving service quality.

Here’s more from JLL:

The average rent in the CBD by end-2023 is projected to rise by less than 1% compared to 4Q22 on an aggregated basis. This is expected to be influenced by higher rents commanded by new building completions, while existing buildings are likely to retain tenants through rent stabilisation policies or other incentives.

Demand increases q-o-q, primarily driven by large-scale tenants

In 3Q23, net absorption of Grade A offices in the CBD rose sharply, mainly due to substantial transactions from banking and insurance tenants at Lancaster Luminaire and TNR Tower. In the context of a global economy that is facing many challenges and uncertainties, the remaining Grade A office buildings have not recorded any new large-scale leasing transactions.

Non-CBD areas also experienced growth in net absorption, largely from the newly launched project, Lotte Mall West Lake Hanoi. By the end of 3Q23, Lotte Mall West Lake Hanoi had recorded a net absorption of approximately 2,500 sqm, following three quarters of pre-leasing activity in the market.

Lotte Mall West Lake enters Hanoi Grade A office market

The completion of Lotte Mall West Lake in 3Q23 brought an additional 20,553 sqm of net lettable area to the market, bringing the total Grade A office area to approximately 323,600 sqm in the CBD and 168,700 sqm in non-CBD areas.

A slight increase in net absorption lowered the CBD vacancy rate to 18.6% in 3Q23. In contrast, the vacancy rate in non-CBD areas increased to 14.7%, primarily due to the new Lotte Mall West Lake Hanoi building becoming operational. Overall Grade A office vacancy in Hanoi in 3Q23 stood at 17.3%, equivalent to about 85,000 sqm of vacant space.

Rent remains stable

Net effective rent in the CBD reached USD 32.6 per sqm, per month, a modest increase of 0.5% q-o-q. This was primarily due to the withdrawal of the BIDV Building for internal use, which had lower-than-average rent, while rents in existing buildings remained stable.

In contrast, non-CBD net effective rents saw a significant uptick with 5.4% increase q-o-q, reaching USD 23.5 per sqm, per month. This increase in rent was primarily driven by the completion and opening of Lotte Mall West Lake Hanoi, which set above-average rents given the project’s high specifications.

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