Creative rental solutions from investors in the face of macro challenges
17/11/2023
Slowdown in the Office Real Estate Segment
The current global economic backdrop is leaving visible impacts on the domestic economy and business operations of companies. According to data from the Hanoi Department of Planning and Investment, in the first half of 2023, 16,900 businesses in Hanoi temporarily suspended operations or dissolved, showing a significant increase of 29% compared to the same period last year, reaching a record high. This marks the first time since the first half of 2020 that the number of businesses entering the market and continuing business activities has decreased. Overall, a large number of businesses in Hanoi are facing financial difficulties.
This, in an indirect way, contributes to the slowdown in the office leasing segment in the capital, leading to an "oversupply crisis." According to the latest market research by Savills Vietnam, the estimated figures for the first half of 2023 show that while leasing capacity remains stable on a quarterly basis, it has decreased by -2 percentage points year-on-year to 86%, with a decrease of -33,400 square meters in leasing area.
Facing challenges from the macroeconomic situation, Ms. Hoang Nguyet Minh, Senior Director of Commercial Leasing at Savills Hanoi, noted, "A large number of businesses in Hanoi are facing financial difficulties. Tenants are cautious in making medium-term decisions. Therefore, in the office segment, investors themselves are flexible in leasing policies, while focusing on providing service incentives to support businesses in searching for and choosing workspace. This is seen as a positive signal that can contribute to the recovery of the market in the coming period."
TechnoPark Tower: An Ideal Destination for Office Tenants
Enhanced Incentives for Office Tenants
In the short term, the demand for new office leases may slow down as tenants remain cautious and hesitant due to economic pressures. Ms. Hoang Nguyet Minh, Senior Director of Commercial Leasing at Savills Hanoi, shared that investors are actively implementing new incentives and policies to stimulate demand and support businesses.
Firstly, some projects are starting to provide necessary support related to fire safety standards (PCCC). With the effective implementation of Decree 136 since the beginning of 2021 and a series of guiding circulars issued from early 2022, the approval process for PCCC design by businesses has become more complicated and continuously changing. This will create a relatively significant barrier in terms of costs and implementation time, especially for businesses lacking experience in this field.
Minh explained, "Extending the fire safety approval process significantly affects a company's budget. In reality, many tenants do not fully grasp the formal approval process, leading to many mistakes in operational processes later on. Compared to before, businesses used to take up to 2 weeks to get drawing approval and another 2 weeks for approval from the Ministry, but now, investors will stand up and directly approve it for tenants, saving a lot of time and optimizing the company's costs."
Secondly, investors are collaborating with leasing units to provide support packages for office construction costs. In the overall context of the expenses companies need to incur to expand or find new premises, construction costs often account for a large proportion, including stages such as design, furniture arrangement, construction, etc. Typically, the time to complete an office is often up to 2 months. Therefore, construction costs are usually considered the biggest obstacle that businesses face when deciding to expand or change office locations.
Regarding this, Ms. Chu Thanh Huong, representative of Vinhomes Office Leasing, analyzed: "Compared to 5 or 10 years ago when the nature of the office real estate segment was merely conducting straightforward buying and selling transactions, investors now play a more accompanying role with customers. In particular, entering the end of the third quarter, the beginning of the fourth quarter, this is usually the time when companies focus on spending plans, annual budget estimates. Therefore, implementing solutions and incentives from now on will create a good premise for a more vibrant leasing market at the end of 2023.
For example, at the TechnoPark Tower office building - the first and only LEED Platinum-certified project in Hanoi, we continuously evaluate the entire market and the difficulties customers are facing, thereby offering the most suitable support packages for businesses, whether in terms of internal utilities or even rental fees."
TechnoPark Tower is a rare project in Hanoi with a total office area of up to 110,000 square meters. As a pioneering green and smart office building, it is considered an ideal destination for businesses looking to expand their business operations in the Northeast economic region. Inheriting a comprehensive ecosystem in the Vinhomes Ocean Park urban area, the project converges a variety of services and utilities within a close radius, effectively meeting the comprehensive needs of tenants working here.
Source: Báo Kinh tế và Đô thị
