Hanoi, HCMC to welcome large amount of new office supply in 2024: Cushman & Wakefield

Hanoi's Central Business District (CBD) will welcome a total of 80,700 square meters of new office supply in 2024, while in Ho Chi Minh City, new Grade A supply is expected in the CBD with the launch of three projects, contributing a total of 118,700 sqm of premium office space to the market, according to analysts from Cushman & Wakefield.

Cushman & Wakefield recently released the Asia Pacific Office Outlook Report 2024, a comprehensive regional report that provides supply, demand, vacancy, and rent data forecasts for cities in Vietnam and other countries.

For Hanoi, in addition to 80,700 sqm of new supply, another 100,000 sqm of new Grade A office space is forecast to come online for the 2024-2027 period.

For HCMC, about 81,000 sqm of additional Grade A supply is also expected in the non-CBD area during the 2024-2026 period.

Economic instability has affected general office demand in HCMC as tenants become more and more concerned about costs. The absorption rate will gradually increase from 2024, thanks to new, higher quality supply and improved economic conditions. Office vacancy rates are expected to be above 20% throughout 2023–2026, driven by continued new supply, the report says.

New supply from Thu Thiem New Urban Area (neighboring the CBD) in HCMC marked a significant step for this submarket to be a true extension of the current CBD. District 7 and Thu Thiem New Urban Area will rise as new business and commercial hubs of the city thanks to the immediate proximity to the current CBD with competitive rents, newer projects with advanced technology, abundant land bank for new developments, and improving infrastructure.

In Hanoi, market demand was strong in the first half of 2023, but demand slowed in the second half and is expected to remain low throughout 2024. Vacancy rates are expected at 25-30% in 2023–2024 and then gradually decrease to about 20.5% in 2027. With abundant new supply throughout Hanoi, the market is expected to be favorable for tenants in the near future. On average, Hanoi's total supply will grow by 3.5% per year from 2023-2027.

Observing many new office developments, the report recorded a heavy focus on sustainability and green practices is becoming clearer, mirroring a trend that has been happening in other markets globally, especially Europe and the U.S.

Most projects on the Vietnamese market, new and operating, are either pursuing or have attained ESG certifications, highlighting the shift in interest toward more sustainable development in recent times. In HCMC and Hanoi, a total of 21 buildings have been awarded LEED/BCA Green Mark certificates, the two leading globally recognized building quality standards. This means there are hundreds of buildings under pressure to retrofit to remain competitive in the market, especially if they want to attract global occupiers.

Global businesses are making net zero commitments, and sustainable real estate will be a critical factor to meeting their goals. Take a technology services company, bank or insurance company for example – up to 80% or 90% of their carbon emissions can come from real estate. This is part of the reason why tenants’ priorities are gradually shifting from a focus on location, rental price, and amenities to what a building could offer in terms of helping to reach their sustainability goals.

Cushman & Wakefield is one of the leading global commercial real estate services firms for property owners and occupiers with approximately 52,000 employees in 400 offices and 60 countries. In 2022, the firm reported revenue of $10.1 billion across its core services of property, facilities and project management, leasing, capital markets, and valuations and other services.