Hanoi market sees strong development in premium offices

By the end of 2022, six new projects are expected. The only Grade A building will be Techcombank Tower on Quang Trung street. This project follows the opening of another international Grade A building, Capital Place.

“Tenants can pick from a variety of new high-quality Grade A properties entering soon, mostly in Hoan Kiem, Ba Dinh and Tay Ho districts. New properties will compete with existing buildings in terms of quality, services and pricing," said Hoang Nguyet Minh, Senior Director of Commercial Leasing, Savills Hanoi.

"Hanoi’s office supply is lower than regional peers like Singapore or Bangkok. However, the rents are lower, the quality is high, and there is great potential for economic growth. These factors mean that foreign investors are still keen on developing projects in the city, creating a healthy outlook for premium office supply.”

In the face of competition in rents, services, and building quality, the critical point is always how landlords and tenants plan to adapt and manage the transformation.

The experts outlined that, increasingly, buildings must cater to demands for green offices and the transition from traditional to hybrid or agile work.

According to Savills' latest market report, the office market will perform well this year, and information technology and finance, insurance, and real estate (FIRE) tenants will lead demand.

According to Minh, the rent of Grade A offices will also depend on the future supply. Increasingly, tenants are selecting offices in buildings with green certificates catering to hybrid or agile working.

Green credentials drive leasing decisions and whether the space can cater to hybrid or agile work. Certified green buildings in Hanoi include high-end properties like TechnoPark Tower and Capital Place.

New properties like Techcombank Tower, Gelex, the office building at 36 Cat Linh, and Tien Bộ Plaza will have LEED Gold green certificates, while Lancaster Luminaire and Taisei Office Building Hanoi will have LEED green certificates. These properties will add nearly 90,000 sq.m of green office space.

Techcombank Tower will be the only new Grade A office building in the central business district this year. The building is likely to perform well, given that it will compete with other office buildings in Hoan Kiem, which are more than 20 years old.

Between 2023 and 2025, high-quality developments, including Gelex, the office building in 36 Cat Linh, Tien Bo Plaza, Lancaster Luminaire and Taisei Office Building Hanoi, will enter the market.

Offices in green buildings have a competitive advantage compared to conventional offices in prime locations. This is as these spaces are more than just rooms filled with desks. Therefore, occupiers often feel more productive and are more engaged at work. The pandemic has accelerated the implementation of hybrid and agile working.

According to a global survey by Savills, leading players like ICT, manufacturing, healthcare, and FIRE tenants are keen on adopting hybrid and agile working.

These models differ from co-working. Co-working is more about having a shared space and services such as concierge, security, and cleaning. Despite its popularity, co-working has certain restraints and is more suitable for start-ups, project-based companies, and short-term leases.

Matthew Powell, Director of Savills Hanoi, said, “The changes we are seeing will influence the market's future.”

Minh said, “Business should plan carefully when implementing changes. They should consider the project's quality and the developer's reputation. They should also consult with professional advisors. Thorough planning will reduce unnecessary costs during the leasing process, control risks, and bring greater satisfaction in the long term."

Savills 2022 Impacts report shows that workers still enjoy diversifying different workspaces. However, many companies want their employees back at the office full-time.

According to the 2021 Savills Office FiT survey, 25% of workers said they concentrate more, and 63% said collaboration is better at the office.

Businesses need to give employees flexibility while providing a healthy and dynamic workplace. To meet these needs while ensuring continuity, companies should carefully consider which offices they select, the way they set them up, and how they build a corporate culture within them.