Office owners planning to raise rents

Unlike the third quarter of the year, when office rents in Hanoi dropped significantly due to low demand, the forecast now sees a 5-7 percent increase in the fourth quarter thanks to the economic recovery.

According to Savills Vietnam, real estate service provider, A and B class office rents continued decreasing by 4.5 and 2 percent in the third quarter of the year. Only C class offices saw an occupancy rate of 80 percent with the average rental level at $17 per square metre per month

However, there have been signs of the upturn over the last three weeks. C class or offices far from the centre have been sought by many businesses. Pham Duc Toan, director of EZ Vietnam real estate company, said rent has increased by 5-7 percent, or 2-5 dollar per square meter

C class office rent in Hai Ba Trung area, for example, has risen from $16-17 per square meter to 18-20 now. The rent of the offices on Nguyen Phong Sac Road has also moved up by two dollars per square meter, now offered at 18-25 dollar

B class offices have also seen rents increase. The building at 193-195 Kham Thien street has rents higher by $3 at 25 dollars per square meter. The rent offered for the offices at No 141 Le Duan Road has also surged to 18 dollars.

Buildings in the centre of the city are now being offered at relatively high rents. The building at No 2 Ly Thai To, which has just become operational, has the leasing fee of 120 dollars for the first floor. The rent is lower for the second floor at $50-55.

There has been many changes in leasing methods. Businesses now tend to make long term leases (20-50 years) and pay upfront. Grand Plaza on Tran Duy Hung road with an area of 5,000 square meters, is being offered for rent at $3,500 per square meter for 50 years. According to IDJ Financial, the owner of Grand Plaza, the building has had the occupancy rate of 60-70 percent.

According to Pham Duc Toan, the decision by the Ministry of Construction to prohibit the use of apartments for offices has made the office market heat up. Apartments, the choice of small businesses, which had been leased at the fee just equal to 50 percent of the rent of real offices, are now gone from the market.

“Office owners well know that a lot of businesses which planned to rent apartments for offices, gave up the plan because of the decision of the Ministry of Construction.” Toan said

Bui Quang Dung, an analyst from Colliers International Hanoi, said that the dollar price increases have also made office rents increase accordingly.

Meanwhile, Savills’ survey shows that three more office buildings have been put into operation, including Plaschem in Long Bien district, CEO tower in Tu Liem district and Handiresco in Ba Dinh District.

These have made the office supply increase by 493,000 square metres. Savills has predicted that there will be some 1.1 million square meters of office available in three years. Experts believe that with the profuse supply, the office rents will not remain overly high.

VietNamNet/VNE

Tags: Vietnam real estate