Create a competitive environment
Office leasing activities have recently been recorded as bustling again with transactions on office expansion or relocation. The market has also recorded a shift in demand from tenants, forcing office investors to change to retain tenants, especially large companies and multinational corporations.
To better understand the shift in tenant demand and find out the factors that effectively retain office tenants, Mr. Matthew Powell - leader of Savills Vietnam, the office market is benefiting from the increase in FDI capital flowing into Vietnam in recent times.
Accordingly, data from the Ministry of Planning and Investment shows that as of April 20, 2024, total FDI capital in Vietnam reached more than 9.27 billion USD, an increase of 4.5% over the same period in 2023. To date, the country has 40,049 valid projects with a total registered capital of nearly 478.58 billion USD.
Many class A offices for rent in Ho Chi Minh City.
Foreign investors invested in 17 out of 21 sectors of the national economy. Of these, the processing and manufacturing industry took the lead with a total investment capital of over 6.15 billion USD, accounting for nearly 66.4% of the total registered investment capital, up 19.8% over the same period.
The real estate business ranked second with a total investment capital of more than 1.73 billion USD, accounting for nearly 18.7% of the total registered investment capital, up 78.2% over the same period. Next were the wholesale and retail sectors; transportation and warehousing with a total registered capital of more than 451.4 million USD and nearly 383.2 million USD, respectively.
The growth of FDI capital and diversification of industries, along with the continued positive business confidence index, have shown that Vietnam is a potential market for many types of businesses, thereby leading to an increase in demand for offices.
Office leasing activities in the first quarter of 2024 were vibrant. In particular, tenants in the information technology, manufacturing and law sectors maintained a high rate.
However, high demand is not for all office segments. Current demand is concentrated in the high-quality office segment, because tenants have more stringent requirements for offices. They need offices that ensure good quality, a good working environment to attract and retain talent.
Working environment is always one of the factors that office leasing investors as well as office tenants aim for.
Therefore, the trend is gradually shifting to green certified buildings, with quality space and full amenities. Therefore, office investors must keep up and ensure the provision of quality standard premises to meet the general taste.
Current trend, most tenants prefer central areas of big cities, where there are new high quality projects, suitable rental prices and close to the center.
It can be seen that the trend of choosing an office of tenants depends on many factors and price is not the only factor that businesses consider, especially for tenants who tend to upgrade their offices to Class A buildings.
For many companies, moving to green-certified office buildings is a top priority or even a requirement, as part of their global ESG commitment to their shareholders and relevant regulatory requirements.
Sometimes companies are willing to pay a premium for a better quality building with green certification, which provides a productive working environment for employees and a positive brand image for customers. So while price is clearly a very important factor, it is not the deciding factor.
Savills experts have noted the difference between green certified buildings and non-certified buildings.
Older buildings that do not meet green standards will now face greater pressure to reduce rents as they cannot compete with buildings with green certification. Evidence is that some landlords, especially for Grade B offices, have had to reduce rents to retain tenants while luxury buildings have maintained stable rents.
“Price is obviously important. But like anything else, many people are willing to pay for quality experiences. Just like buying a car, clothes or handbags, sometimes a price difference is acceptable for higher quality products and services,” said Matthew Powell.
Office rents in Ho Chi Minh City are rising
According to Savills experts, the office market in Ho Chi Minh City has many strengths, with large office spaces accompanied by a larger commercial market. Office rental prices in Ho Chi Minh City remain higher than in Hanoi, especially in projects in District 1.
However, the Ho Chi Minh City market was previously mostly concentrated in one area, District 1, which provided the main office supply. However, this market has now recorded a shift to the Thu Thiem area, with new office supply, large floor areas and many green certified projects.
Meanwhile, the story in Hanoi is different. Hanoi has a more widespread development of the office market, when there are different locations focusing on commercial projects such as Hoan Kiem, Ba Dinh, the West of Hanoi and soon the West Lake area.
However, the current occupancy rate of projects in the Hoan Kiem and Ba Dinh areas is quite high. Therefore, new buildings expected to be launched in the near future such as Grand Terra, Taisei Square Hanoi, Tien Bo Plaza and BRG Diamond Park Plaza will be new supply sources, creating more excitement for commercial activities.
Ho Chi Minh City is considered to have a large number of offices for rent that attract a large number of customers and have better prices.
Experts also believe that office rental prices in Hanoi are unlikely to surpass those in Ho Chi Minh City in the future.
Accordingly, according to Savills Asia Pacific, in the second half of 2023, the rental price of Grade A offices in Hanoi in relation to the region remains at an average level, at 41.7 USD/m2/month (including taxes and service fees). Meanwhile, this figure recorded in Ho Chi Minh City is 63.2 USD/m2/month.
In particular, with new Grade A supply in Hanoi expected to increase in the coming time, rental prices will continue to be competitive.
For individual buildings that are popular or of good quality, higher prices may be required, but they will not be significantly higher than the alternatives. Therefore, in the coming time, Hanoi will maintain reasonable rental prices for high-quality premises.
At the same time, experts also believe that the investment cost for green buildings is a long-term investment. Meanwhile, the story of price reduction is a short-term story. Because office tenants often use the building for a long time, at least 5-10 years, or even longer.
Therefore, sustainably developed green office buildings are an extremely important factor for investors to retain long-term tenants. Thus, the current problem for investors of green projects is long-term investment.
Source: https://www.nguoiduatin.vn/thi-truong-cho-thue-van-phong-soi-dong-va-nhung-du-bao-cua-chuyen-gia-a663028.html
Comment (0)