Under COVID-19 effects demand for more versatile office space increased in Vietnam. Co-working space and virtual office are recorded to increase in Viet Nam. As online working increasingly challenges the older classic office model, where is the office market heading?
In Q1/2021, Ha Noi Office supply reached over 2 million sqm, increasing 3% from the last quarter and 10% compared with 2020 with a stable occupancy rate of 89%. Specifically, this segment witnesses some changes in response to current trends towards office usage from other parts of the world. These are the particular needs towards versatile, co-working or virtual offices.
As anyone with space and a laptop can effect output, offices are no longer limited to basic working requirements, and aiming to integrate with fundamental services and amenities that create an experience of a sense of community and ensure a work-life balance for the users. Many companies now require more flexible office space to encourage the collaboration and exchange of information between employees and departments. The key takeaway of this approach is convenience. According to Savills Office FiT survey results (2020), 89% of the participants believe that the traditional office remains a necessity for their work, but the pandemic also changes the way they use office in a more adaptable manner.
Another notable aspect of the office market during and after the COVID-19 pandemic is the growing interest in co-working spaces. The primary users of co-working spaces are usually start-ups, newly established companies and freelancers. This model is appealing to this segment because it allows them to work independently or communicate with their colleagues. However, there also exists a number of setbacks of co-working spaces as compared to traditional offices, although co-working and traditional offices do not directly compete with one another.
Mrs. Hoang Nguyet Minh, Director of Commercial Leasing Department, Savills Ha Noi comments, “co-working space is a youth skewed trend to work out of their homes in a more adaptable business environment. The subsegment targets start-ups or freelancers. However, some companies with over 30 staff are interested in developing their corporate culture rather than just settling in a space. Co-working spaces are good for flexibility but do not fully support developing a shared corporate culture, so it rarely becomes long term. Grade B and C offices now have the highest occupancy in market, partly because businesses need areas from 1,000–2,000 sqm. They tend to choose more affordable spaces, to mitigate fit out costs, which can be easily modified to align with their corporate culture.”
Mrs. Do Thi Thu Hang, Senior Director, Advisory Services added, “In reality, co-working space developers have already modelled this approach and how it may not support companies in building culture. In order to solve this, they are considering switching to service large businesses or those interested in increasing or decreasing leasing areas. This is among many issues that co-working space developers have to tackle."
On the other hand, the pandemic reveal the emergence of a niche office market, virtual office. During the spread of COVID-19, virtual office services are deemed the optimal solution to operate with lower costs than traditional spaces by start-ups and small businesses.
Virtual office providers assist tenants in registering their official address alongside other support services such as mail or meeting rooms. A registered office address allows working from anywhere. This approach is not recommended due to its lack of legal transparency in registration. Mrs. Hoang Nguyet Minh stated,“There is no transparent legal basis supporting virtual space with businesses only entitled to business and domain name registration, rather than any physical space under lease. Businesses tend to lease by month or pay for the days they use the office. Providers are responsible for receiving reports from and staying in contact with business tenants. Its flexibility makes this approach suitable for start-ups or companies that recently entered Viet Nam.”
Alternatives to traditional space target a specific customer base of freelancers, start-ups, small-scale business, or new representative offices. Mid- to large-sized companies prefer conventional office space for all manner of reasons. Apart from cost, safety and employee wellbeing, the flexible office approach needs to optimize while diversifying its workspace.