Hanoi property market 2023 overview and 2024 forecasts: Cushman & Wakefield

Cushman & Wakefield analysts give an insight into real estate segments in Hanoi in 2023 and prospects for 2024.

Office supply

In 2023, three Grade A and two Grade B buildings were launched/re-launched across Hanoi, contributing about 125,000 square meters into total supply. Besides, one project was withdrawn from the office-for-lease market. Altogether, in 2023, the city welcomed an additional 100,000 sq.m of new Grade A and B office space.

Grade A supply accounted for nearly 61% of new supply in 2023, all coming from the secondary submarket. The Grade A sub-market in Hanoi is currently in a highly competitive landscape with a total Grade A supply of 646,000 sq.m. This is 33% higher than Ho Chi Minh City.

As of Q4/2023, the sizes of Hanoi and HCMC Grade A and B markets were quite similar, with 1.7 million sq.m and 1.5 million sq.m, respectively. Amidst heightened competition, some older buildings have planned and/or conducted upgrades to their premises and improved tenant attraction and retention.

Similarly, newer projects are pursuing and adopting higher standards, especially those related to sustainability and ESG (environmental - social - governance), to qualify the evolving demands of large and reputable multinational corporation tenants.

With new supply for both Grade A & B, occupancy for both segments recorded a decrease year-on-year, down 3.6 percentage points and 5.2 percentage points, respectively.

At the end of 2023, the average rent of Grade A still recorded growth, up 0.5% quarter-on-quarter and 2.6% year-on-year, mainly driven by new buildings quoting above-average rents.

Meanwhile, Grade B rent slightly dropped 0.7% quarter-on-quarter and 1.4% year-on-year. Amidst competitive market conditions, landlords of both Grade A and Grade B have applied more flexible rental strategies to attract and retain tenants.

In 2023, due to the slowdown in the market, several tenants with strong financial capability have seized the opportunity to upgrade their offices by either moving out to their building or to Grade A buildings. As a result, Grade A buildings have been the primary factor driving absorption in Hanoi this year.

The Grade B segment has been impacted by the ongoing economic slowdown, leading to renewal, downsizing, and downgrading among its occupiers.

Hanoi's Grade A and B office supply is expected to reach nearly two million square meters by 2027.

Retail

Thanks to the entry and re-entry of multiple projects in 2023, rents recorded notable growth of 7.3% year-on-year and remained stable quarter-on-quarter. A few retail podiums that have been underperforming within the last three years have adopted more flexible leasing strategies, gradually shifting toward office and services tenants.

Occupancy was recorded at 86%, up 1.3 percentage points quarter-on-quarter and stable year-on-year as new and re-entering projects achieved nearly full occupancy by the end of the year, signifying a sustained demand for retail space with high quality and good management.

Lotte Mall West Lake Hanoi, launched in September 2023, is the largest commercial complex of the Lotte Group in Vietnam.

Tasco Mall was renovated, re-branded, and relaunched in October, with an improved tenant mix and new interior.

In June 2023, The Loopby Takashimaya Group was relaunched with a more diverse tenant mix and better use of green spaces for community events.

Trang Tien Plaza has undergone a partial renovation and re-layout process, paying more attention to visitors’ experiences.

Apartments

Overall, 2023 witnessed a downtrend in Hanoi’s apartment primary supply, decreasing 30% compared to the previous year. This was due to the negative effects of the global economic recession and customers’ hesitation in making transactions.

In Q4/2023, the apartment market welcomed above 2,900 units, up 60% quarter-on-quarter and 50% year-on-year. The new supply was from mid-end and high-end projects developed by foreign developer Newlife (GIC) and well-known domestic developer Masterise Homes. Mid-end projects continued to dominate the new supply in 2023 with a contribution of over 90%.

In tandem with the new supply, the 2023 sales volume saw a significant 35% decrease compared to the previous year due to market fluctuations caused by the risk of the global economic crisis and the impacts of credit control on the real estate industry in 2022.

However, an improvement was seen in H2/2023 in both supply and demand due to the loosening of monetary policy. In Q4/2023, the average primary price reached $2,327 psm, up 9% quarter-on-quarter and 27% year-on-year.

The increase was driven by the new launch of Lumiere Evergreen and The Canopy Residence projects. In the near–term, the average primary selling price is expected to continue to increase due to the rise of development costs and the lack of future affordable supply.

2023 witnessed the lowest new supply since 2018. However, in the second half of the year, the supply improved gradually thanks to new launches from both prestigious developers and foreign developers in the west.

In 2024, the market is forecasted to welcome above 9,300 units launched, with more to come in 2025 and 2026. The majority of future supply is expected to come from the suburban sub-market (Dong Anh, Gia Lam, Ha Dong, Hoai Duc, Hoang Mai, Long Bien, Thanh Tri district) which has benefited from the completion of new infrastructure.

Landed property

2023 experienced a notable decrease in Hanoi’s new landed property supply with 310 units launched, down 89% compared to the previous year due to buyers’ cautious mindsets regarding the global economic downturn.

It was the lowest number of landed property new supply in five years 2018. Q4/2023 welcomed 125 units launched, up 50% quarter-on-quarter and 17% year-on-year. Most of them originated from suburban areas such as Ha Dong, Thuong Tin, and Hoai Duc district.

In line with the decrease in new supply, in 2023, Hanoi landed property sales volume was only 261 units, down by 85% year-on-year. This was the lowest figure regarding Hanoi’s landed property sales volume in the last five years.

A fluctuation was observed in the average selling price in Hanoi, which is attributed to the locked status of some projects facing legal issues or waiting for better market sentiment. In Q4/2023, the average landed property primary price reached $5,935 psm, increasing by 9% quarter-on-quarter but decreasing 23% year-on-year. The small qaurter-on-quarter change in the landed property primary price was thanks to the new launch of projects coming from suburban areas.

Hanoi’s landed property supply is expected to increase in 2024 but not equivalent to 2022’s figure. Suburban areas will dominate the future supply thanks to larger land banks and improved infrastructure connecting the inner city.

A notable number of the supply will come from integrated townships by prestigious developers and all-in-one facilities.

Industrial real estate & logistics

Q4/2023 recorded a new industrial park (IP) land supply of about 121 ha from Thang Long IIIP (expansion phase 3) in Hung Yen province.

The northern IP land market continued to be the spotlight of investment attraction with up to 228 ha absorbed in Q4/2023. In particular, Hai Duong and Hung Yen were the two leading provinces in terms of net absorption, contributing 33% and 27%, respectively.

Amid strong demand and sentiment, the average primary price of IP land kept on an upward trend, reaching $125/sq.m/lease term, an increase of 1.4% quarter-on-quarter and 10.0% year-on-year.

Three new ready-built factories (RBF) projects were launched in Q4/2023, namely BW Nam Dinh Vu 2 and DHP Nam Cau Kien in Hai Phong city, and FPV Industrial Centre Yen My-Phase 1 in Hung Yen province, bringing about 89,200 sq.m to the market.

Similar to the IP land segment, demand for RBF surged in the quarter, with a net absorption of 161,000 sq.m. Hai Duong, Hai Phong and Vinh Phuc led in terms of RBF demand with contributions of 39%, 27%, and 22%, respectively.

Electronics, computers, and optical products were the main demand sources for RBF.

Rents of RBF remained stable quarter-on-quarter at $4.9/sq.m/month, increasing 3.9% year-on-year.

The market welcomed a new RBW supply of about 116,500 sq.m from two projects, namely IDEC Logistics Center in Bac Ninh province and Mapletree Logistics Park Hung Yen Phase 3 in Hung Yen province.

As challenges from global economic uncertainties remained, the net absorption of RBW in the Northern Key Economic Region (NKER) was recorded at about 32,300 sq.m, decreasing 71% quarter-on-quarter.

The majority of RBW leasing demand came from the manufacturing sector. Hai Phong led in terms of net absorption with 37% in total.

The average rent reached $4.6/sq.m/month, stable quarter-on-quarter and increasing 1.4% year-on-year.

The developers of IP in the NKER are rushing to prepare the IP land bank in order to take advantage of the investment wave in Vietnam. Therefore, a significant IP land new supply will enter the market in the 2024-2026 period, at about 5,500 ha across seven provinces in the NKER.

The northern region will welcome a future RBF supply of about 1 million sq.m in the period 2024-2026. Demand for RBF is expected to be sustained by the manufacturing sector, particularly supporting enterprises in the electronics and automotive sectors.

After a period of continuous new supply, there will be less supply of RBW in the 2024-2026 period than in the 2021-2023 period, with just 700.000 sq.m entering the market.