Office-for-lease prices on the riseVietNamNet Bridge - The source of supply is limited while the demand is increasing along with the establishment of many new companies. The prices for offices for lease, as a result, are rocketing.
Four years ago, the price for a square meter of an A-level office was only US$27/month but now it is $30-37/sq/m/month in HCM City’s districts 1, 3, and 5.
In the city’s suburbs, districts 7, 8, Phu Nhuan, Go Vap and Tan Binh, prices for offices also range from $12-28/sq.m.month. For high-rise buildings in which an entire storey is leased, leasing contracts are signed for 2-3 years.
In District 1, the Sun Wah building on Nguyen Hue road has been rented fully for years, and last year’s prices were $30-33/sq.m/year. According to M&C company, which has hired offices there for three years, the prices will be higher this year.
At the Saigon Trade Centre on Ton Duc Thang street, District 1, the price on signed contracts is $27/sq.m/month. However, customers are worrying that the price will increase by 5-10% on average when they sign new contracts.
Far from the city’s hub, the E.town building on Cong Hoa road, Tan Binh district is leased at the price of $17/sq.m. Though the building was just put into operation on March 22, it is already 90% full.
On big roads, street front houses are also leased as offices at prices that are lower than those of C-level buildings.
In Hanoi, the price for an A-level building like Hanoi Towers, Vietcombank Tower, and Pacific Palace has soared to $38/sq.m/month compared to $30 last year.
Pacific Place, which is located on Ly Thuong Kiet road, after being transferred to a French group, has been fully booked before the construction has even been completed.
A B-level building like Hoa Binh Towers on Hoang Quoc Viet road is quickly filled in around six months after operation.
Not only office buildings but also high-storey buildings are expensive now.
Bustling investment in office buildings To meet the increasing demand, many real estate companies have invested in building office buildings.
While preparing for the construction of the third tower besides the two current towers, Vincom has asked for a licence to build a building next to Hom Market.
The Vietnam Construction Import Export Corporation (Vinaconex) is also preparing to build a trade centre near Mo Market, which includes offices for lease.
At the same time, some domestic investors are eyeing trade centre - office for lease projects near Hang Da and Cua Nam markets.
Though many office building projects have been kicked off, the market for A-grade offices in Hanoi is forecast to remain short because land area at good sites in the city is limited.
According to Neil McGregor, Service manager of Chesterton Petty Vietnam, the need for offices mainly comes from local and foreign companies that are expanding their businesses. “Service companies, particularly banks, are entering Vietnam and they all want to hire offices at buildings on good sites,” he said.
Truong Thai Son, Deputy General Director of the Hoang Quan Real Estate Company, said that prices for offices increase by 10% annually on average. That’s an ideal number that makes many investors want to jump into this field, he said.
Commenting about the potential and price fluctuations of the office for lease market in the near future, Mr Son predicted that prices for A-grade offices would grow by 20% in 2007-2008, 10% for B-grade and around 5% for C-grade offices.
Le Quang Buu, a senior manager of Jones Lang Lasalle, an American real estate consulting, investment and management group, said that the price for offices for lease in HCM City would rise in the second quarter and the early part of the third quarter, perhaps up to $40-50/sq.m/month.
According to Chesterton Petty, many big office building projects are underway but they will not be completed until 2008-2010. Consequently, the market of offices for lease in Hanoi and HCM City will be still in short supply for the next 2-3 years.
An expert said that the increase of offices for lease would benefit real estate companies but that this would affect local companies, who can’t compete with foreign firms to have offices at favourable sites. In addition, the increasing prices of offices for lease may become a hindrance for foreign investors.
This expert said that it was necessary to have an organisation to control the prices of offices for lease so that it would not put more pressure on local and foreign investors.