Challenges Faced by Hanoi Office Buildings in Attracting Tenants

According to CBRE Vietnam, the second quarter of this year saw a decrease of 5,000 square meters in leased office space in Hanoi. This decline can be attributed to tenants downsizing or opting for co-working spaces. The grade B office vacancy rate also rose by 5 percentage points year-on-year, reaching 15.5%. In addition, a report by JLL revealed that the absorption rate of grade A office space decreased by 28% to 7,300 sq.m., with a vacancy rate of 17%, equivalent to 79,000 sq.m. The increase in new office supply since 2020 coupled with stagnant demand has contributed to these challenges.

The Vietnam Association of Realtors stated that many businesses faced difficulties, leading to a reduction in size and closure of branches, resulting in decreased demand. A real estate brokerage in Nam Tu Liem District shared that they closed branches in other provinces and downsized their headquarters in Hanoi by two-thirds since the end of last year. The technology and other sectors have also witnessed downsizing of their office spaces. IT companies, in particular, experienced a 50% decrease in office lease deals during the first half of the year, according to Savills Vietnam.

Affordability has become a priority for tenants, causing a decline in demand for buildings with high rents in the range of $40-50 per square meter. To cut costs, many businesses have turned to renting serviced or co-working offices for the short term. Maison Office, an office leasing firm, reported that most prospective customers who inquired about leasing offices at the end of last year have postponed their plans. The first half of this year saw a 150% year-on-year increase in deals for co-working space, although most transactions were for offices with fewer than 10 seats, resulting in an overall decline in leased space.

CBRE predicts that more office buildings with a total leasable area of 90,000 sq.m. will enter the market this year, leading to an expected increase in vacancies at existing buildings.