Performance in the Ha Noi office market has remained stable despite Covid-19, the effects of which has seen many businesses changing to more flexible working styles. Here are our key insights on the upcoming year.
Recovery
According to The Economist, in 2021, GDP will increase by 5.2% year on year (YoY), slower than in recent years due to the lingering effects of Covid-19. FocusEconomics forecasts average GDP growth of 6.7% pa from 2021-2025 for Viet Nam to remain one of the leading economies in SE Asia.
Ha Noi business environment continues to improve. In 2020, the city attracted FDI of US$3.72 billion. A Q4/2020 Government survey of manufacturing enterprises found 41% saw improved business performance over quarter three, 35% remained stable while 25% admitted problems. Their outlook for Q1 /2021 has 43% expecting business performance to improve, 38% expecting more of the same, while 19% see further difficulties.
Mr. Matthew Powell, Director of Savills Hanoi, confirmed Savills was extremely active in commercial leasing in 2020 and expects this to continue. Significant growth in Technology, Software, Life Insurance, and E-Commerce continued despite Covid-19. Mr. Powell said: “We expect the Ha Noi office market to continue growing steadily in 2021, given how Covid-19 is being managed, the increasing international visitors, in addition to favorable economic and demographic factors. Sector growth is mainly being driven by Viet Nam based clients wanting to expand their business into Ha Noi”.
Stable performance
The three segments of the office market are in robust health. Grade B office had the fastest supply growth of 6% pa while Grade A increased 4% pa and Grade C moved up 3% pa. Total supply of nearly two million m² was up 2% quarter on quarter (QoQ) and 6% YoY following the Q/3 entry in the CBD of Grade A International Center with 7,000 sqm; and 33,000 m² from Grade B Century Tower in Q4/2020.
There has been mounting interest in Grade A office from Korean and Japanese investors in Ha Noi. Developers are continuing to plan and open high-quality office in Ha Noi and Ho Chi Minh City.
Covid-19 response
When Covid-19 hit Viet Nam in early 2020, business had to consider different working approaches and space needs. Hotels and tourism, which suffered the most, now require less office space, while IT and e-commerce firms continue to grow.
Ms. Hoang Nguyet Minh, Director of Commercial Leasing at Savills Hanoi said: “A lot of companies have changed to more flexible working. Office requirements are being reconsidered based on new criteria of work efficiency and workspace convenience, with greater focus on larger common areas instead of designated spots for each department. Tenants can also consider annual reviews of requirements and leasing status to keep track of market changes and the pandemic situation”.
The work-from-home trend has stuttered a little with Covid-19 being well contained in Viet Nam. However, many companies still see this time as an opportunity to downsize, reduce operating costs while investing more in technology.
The pandemic is raising the need for more flexible and creative office working spaces as well as more employee-friendly environments to increase productivity and creativity. This is a major challenge for older office buildings. Landlords who proactively implement complementary services, strict health and safety compliance and flexible leasing will secure better positions in the Ha Noi office market.