Three key points shape the vision of office tenants in 2023

IT Manufacturing Sector Leading Office Space Demand in Hanoi

The Q2 2023 Real Estate Market Overview report by Savills Vietnam reveals that despite strong development during the pandemic and in 2022, technology companies across Southeast Asia, especially tech startups, are experiencing a slowdown after a period of rapid growth. In Hanoi, some IT companies have had to reduce rented office space, or even return premises before the lease term expires. In the first half of 2022, the total transaction volume in the office leasing segment was led by the IT sector. However, in the first half of 2023, this number decreased by half.

The study further indicates that leading the total transactions are companies in the manufacturing sector. Following manufacturing is the education sector, such as language training centers, computer training centers, or offices of universities.

Assessing the prospects of the Hanoi office market in the near future, Ms. Hoang Nguyet Minh, Senior Director of Commercial Leasing at Savills Hanoi, notes: "In the next 6 months, the office market is likely to recover very quickly. Average rental prices and leasing capacity will increase. Businesses in the manufacturing, education, and private sectors will continue to increase demand for office space. This will be the main driving force for the development of the Hanoi office market in the last 6 months of this year as well as the first half of 2024."

TechnoPark Tower - Pioneering Modern Technology Trends

Three Noteworthy Points Shaping Tenant Leasing Vision

Recent economic fluctuations globally and in the region have had a certain impact on the preferences and leasing needs of the corporate tenant group. The Senior Director of Commercial Leasing at Savills Hanoi analyzes three key factors influencing the leasing decisions of businesses in the future.

Firstly, tenants tend to favor deals with more modest rental prices and are cautious when making medium-term decisions.
   
Faced with the pressures resulting from global economic changes, many businesses are experiencing a slowdown in growth, and funds are halting investments in startups. In the first half of 2023, 16,900 businesses temporarily halted operations or dissolved in Hanoi, an increase of 29% YoY and reaching a record high. Businesses are increasingly prioritizing cost considerations when contemplating leasing options. Instead of paying $50-55/m2/month for offices in Hoan Kiem district, businesses are turning to similar alternatives in inner districts like Ba Dinh, Dong Da, and Cau Giay, with more favorable costs. These areas are expected to attract a high demand for office space in the last 6 months of the year.

Secondly, the Hanoi office market adapts a flexible working model to optimize space and rental costs.   

After the impact of the COVID-19 pandemic, employee work habits have changed significantly. According to a survey conducted by Savills Vietnam with 447 tenants in Hanoi, besides specific facilities or technological factors, the majority prioritize flexible/remote work models when discussing the working environment. To retain and attract talent, business owners are forced to make adjustments to office design strategies and build corporate cultures that align with the current working habits of employees.

Thirdly, office products that pursue green and sustainable criteria continue to be in the sights of tenants.
   
With Vietnam's commitment to reducing net emissions at COP26, listed companies on the stock exchange must disclose ESG reports, assessing environmental and social impacts. Consequently, the office market has seen a significant increase in demand for new, high-quality projects with advanced technical systems, built to be environmentally friendly and sustainable.

In the office sector, the demand for quality projects has created a clear distinction in the market. Tenants are willing to pay extra to rent green and sustainable office spaces. TechnoPark Tower, with LEED Platinum certification, is one of the rare projects in Hanoi meeting these criteria.

Ms. Hoang Nguyet Minh, Senior Director of Commercial Leasing at Savills Hanoi, notes: "Greening office buildings has become almost a prerequisite. Working in these projects, businesses optimize operational costs, save energy consumption, and provide a working environment that prioritizes physical and mental health, fostering collaboration among employees."

In Vietnam, the market has only recorded two LEED Platinum-certified projects, with TechnoPark Tower being the only one in Hanoi.

TechnoPark Tower, operational since 2021, is a green office project entering the Hanoi market with nearly 110,000 m2 of office space. The project excels in regional connectivity, transportation links, and innovative creativity, playing a crucial role in achieving the most stringent international LEED certification.

Furthermore, the building benefits from integrated transportation infrastructure in East Hanoi, with the Thanh Tri Bridge, National Highway 1A, National Highway 5, and the Hanoi – Hai Phong expressway, facilitating convenient movement between administrative and economic centers in the inner city and provinces in the Northeast economic corridor, including Hung Yen, Bac Ninh, Hai Duong, and Hai Phong.

Ms. Chu Thanh Huong, representative of Vinhomes Office Leasing, states: "Modern workers themselves are seeking and demanding more in a working model. Not only stopping at the quality of facilities such as desks, computers, etc., as traditionally emphasized, but the criteria of a flexible/remote work model has become the top priority when discussing the working environment."

In conclusion, TechnoPark Tower is a rare project in Hanoi with a large office area. It is a pioneer in green and smart office trends, making it an ideal destination for businesses looking to expand their operations in the Northeast economic region.

Source: Báo Diễn đàn Doanh nghiệp

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