Office Market in the Limelight

29 Apr
VNRE Ending the first quarter of 2012, the real estate market continued challenging the tolerance of investors, especially in the housing segment. The market is supporting end-buyers as housing prices are still on the downtrend and investors paying closer attention to customer requirements. Vietnam Business Forum summarizes the main events of the real estate market in the first quarter of 2012.

Housing market – Business ethics of primary investors

In the first quarter, the apartment market witnessed slow offering from investors. The supply was quite limited, with only 1,100 units, compared with 25,000 units in 2011. Not only buyers but investors are in a “wait and see” mode, pending market developments. New buyer-catching projects are mainly for low-income earners in Hoang Mai, Long Bien, Tu Liem and Cau Giay districts, Hanoi.

For the quarter, many projects were delayed or suspended although investors had sold apartment units to customers while many other projects still ensured construction progress although it was a bit slower. This highlighted business ethics and confidence of investors.

According to CBRE Vietnam Company, a property consultant and researcher, in 2012, the supply was forecast to reach 20,000 units. However, the real supply may be much lower if present market conditions keep lacklustre. The economy is showing signs of recovery; hence, the secondary price downtrend will slow down. Customers distrust investors’ ability to complete their projects, making construction progress and quality the top determining factor. For this reason, sale is better when the projects are nearing the final stage.

For villas and semidetached houses in urban zones, many wondered whether prices reached the bottom. Like three previous quarters, secondary prices continued to drop sharply in nearly 50 percent of projects in this quarter

Price decrease, despite lower than in the past quarter, remained at 5 – 10 percent. The degree of price reductions depended on construction progress. Newly constructed projects saw a 5 percent rebate, even 10 – 15 percent in some projects. Meanwhile, prices were slightly changed in completed projects. However, compared with rates in the first or second quarter of 2011, secondary prices in all projects slid 20 – 50 percent.

Buyers continued to wait because they expected further fall and they only looked for projects developed by reputable investors. Mr Richard Leech, Managing Director of CBRE, said the housing demand of end-buyers needs to be tested. Till now, the effect of recent interest rate cuts remains vague on the property market.

Office market – Positive signals

In the first quarter of 2012, the office market had no new supply, total supply stably approximated at 985,000 m2.

The Hanoi office market remains positive signs. Typically, the total newly rented area was over 14,000 m2, a high demand. Vacancy ratio fell to 25 percent from 30 percent in the previous quarter. According to statistics, nearly 390,000 m2 of office space are expected to enter the market in 2012. Experts said that rented area will hit a refresh record in 2012 although vacancy rates and supplies continue to rise.
In the western area, prices are forecast to slide to let more while owners in the downtown will not compete in price. In addition, investors will also apply more strategic steps. For new projects, investors can apply more competitive price policies for tenants and brokerage units. For old projects, they will focus on restoring and upgrading.

Retail space market – On the tenant side

After the special fourth quarter with three large commercial centre projects brought into operation, adding 109,500 m2 to the market, there were no new projects inaugurated in the first quarter of 2012. The total supply stood at 250,000 m2.

Occupancy rates across the market slightly slid although there were some big tenants like Home Entertainment Centre and New Cinema because their leased spaces belonged to others earlier, or from newly operated projects like Vincom and Centre Long Bien. In the downtown, the vacancy rate in the business centre was 5 percent, down 0.6 percent from the previous quarter, while vacancy rates out of the business centre was 14.9 percent. In the downtown, rents are quite stable because vacancy rates are unchanged. However, rates in non-business districts decline because of a rise in vacancy rates.

Serviced condos – more choices for buyers

Keangnam Landmark 72 opened in January 2012 with 378 serviced apartments for the area west of Hanoi. With this huge supply, the project has offered attractive incentives and promotions for customers. While rents offered by most investors were almost unchanged from the previous quarter, some projects, especially those in the west, were ready to negotiate rental prices to catch the attention of with customers in the face of competition from serviced apartments of Keangnam Landmark 72. Occupancy rate reached 81 percent, a slight increase from the previous quarter. Customers are interested in serviced apartments in the western region because many companies rented offices here.

Reported by Luong Tuan | VCCI News

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