According to Savills, in the unfavorable economic context, in the first half of the year alone, 16,900 businesses suspended operations or dissolved in Hanoi, an increase of 29% per year and reaching a record high.
The number of businesses entering the market and continuing to operate also decreased for the first time since the beginning of 2020. Along with that, many businesses facing financial difficulties have affected rental capacity.
The number of bankruptcies in Hanoi is at a record high, forcing landlords to lower office rents. (Photo: DT)
According to Ms. Hoang Nguyet Minh, Senior Director of Commercial Leasing, Savills Hanoi, there are two reasons affecting the decline in rental capacity across the market.
First, it can be seen that the segment of tenants paying over 40 USD/m2 tends to slow down significantly, while contracts with modest rental prices are more popular.
The second reason is that IT companies, especially tech startups, are slowing down after a period of hot growth.
“In Hanoi, some IT businesses have even been forced to return their premises ahead of schedule,” said Ms. Minh.
According to Ms. Hoang Nguyet Minh, the market in the quarter recorded changes in rental demand. Specifically, in 2021 - 2022, information technology enterprises almost led the demand for office space in the market.
However, by 2023, when the economic situation tends to slow down, funds also stop investing in startups, leading to these companies starting to rebalance their rental space, even returning office space.
“In the first six months of 2022, the number of leasing transactions with IT business tenants accounted for 32%, but this year, this rate has only halved,” Ms. Minh shared.
According to the expert, the tenant structure has also changed. In the first six months of the year, most office leasing transactions came from businesses in the manufacturing segment, because this is a sector that is not too affected by the current economic situation.
Coming in second in terms of rental demand are educational businesses, typically foreign language centers, computer training centers or university offices opening in the Vietnamese market.
Ms. Minh expects that the market in the last months of the year will record a number of large transactions with businesses operating in the fields of consulting, finance, and law.
The special feature of these businesses is that the rental demand for area will be at an average level, in the range of 200 - 500 m2.
To maintain competitiveness and boost capacity, many leasing units have plans to lower rental prices and increase promotions to support tenants.
Meanwhile, tenants are increasingly prioritizing cost and leaning towards more affordable options.
Ms. Minh emphasized: Transactions in the current office market fluctuate in the price range of 20-35 USD/m2, buildings in this price range still have very good absorption.
However, buildings with high rental prices at 40-50 USD/m2 in the market show signs of slowing down in the number of transactions compared to the same period last year.”
Currently, the demand for office space continues to be recorded, and companies still encourage employees to work in the office more. This can ensure the security of the company, while promoting the development of convenient services for employees to use.
Therefore, companies today will pay more attention to designing offices that meet the needs of employees, thereby increasing the desire of employees to go to the office. Therefore, office buildings with diverse amenities, convenient locations and affordable prices are the top choices of tenants today.
Faced with these changes, Ms. Minh assessed: “Demand for office space in the last 6 months of 2023 will be concentrated in Ba Dinh, Dong Da and Cau Giay areas. Central areas such as Hoan Kiem will have less demand because currently vacant space here is very limited, while rental prices remain high.”
In addition, Ms. Minh predicts that average office rental prices and occupancy rates will improve by the end of the year, as new supply by the end of the year will only be about 80,279 square meters, with Lotte Mall accounting for 38% of new supply.
Next, the demand from manufacturing, education and consulting businesses will continue to increase. These are considered the main sectors, promoting the development of the office market in the second half of 2023 as well as the first half of 2024.
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