Office rents are forecast to continue rising in the two cities given high occupancy and limited supply.

Office segment in HCM City in Q2. Source: C&W 

Office rents went up in Ho Chi Minh City and Hanoi, Vietnam’s two largest metropolises, in the second quarter this year due to tight availability, and this trend is predicted to continue in in the short and medium terms, Cushman & Wakefield (C&W), a leading global real estate services firm, has said in a report.

Average asking rents trended upwards continually in HCM City, rising 9% quarter-on-quarter (QoQ) and 18% year-on-year (YoY) due to the increase in rent of buildings in prime locations with limited vacant space for lease, the firm said.

The upward trend is expected to continue in the short to medium term due to limited supply, C&W forecast.

Substantial space was absorbed during the quarter, 84% of which happened in grade B buildings, whilst absorption in grade A was minimal due to tight availability, it added.

Similarly, rents for both grades in Hanoi rose between April and June. Grade A recorded rental increases of 4.1% QoQ and 8.0% YoY due to the exit of a lower-rent project which was regraded to grade B. Meanwhile, grade B had modest increases of 0.7% QoQ and 2.5% YoY. 

Both grades continued to maintain high occupancy at 92% - 93% with considerable absorption of more than 27,500 square meters, around 75% of which was contributed by recently completed projects in 2017 and 1H 2018.

Office segment in Hanoi in Q2. Source: C&W

“We sent a cautionary note in Q3 2017 that prime rents would increase as much as 20% in 2018; it is clearly happening. There is a continued undersupply until the end of 2019 in the grade A segment,” Alex Crane, managing director of Cushman & Wakefield Vietnam, commented.

Cushman & Wakefield predicts that rents in Hanoi will soon be half of that in Ho Chi Minh, which is an opportunity for the capital to grow at a large pace as office real estate becomes extremely expensive in the southern hub, the company noted.

Hanoitimes