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Rental Premises Market: Rising Demand, Limited Supply
Since the start of Q2 2022, offices, commercial premises and housing for lease have recovered strongly, while new supply has shown signs of slowing.
Demand rises rapidly
A survey by Kinh te & Do thi journalists of Hanoi's rental premises market found a strong recovery, especially since the start of Q2 2022, although asking rents remained relatively high.
On Minh Khai Street in Hai Ba Trung District, a 200 m² seven-story street-front building was offered at VND 500 million a month; a newly built 40 m² four-story building at VND 40 million; and a newly built 30 m² four-story building on Truong Chinh Street, Dong Da, at VND 70 million. On major streets in Hoan Kiem, Ba Dinh and Cau Giay, rents likewise ranged from VND 100 million to 600 million a month, depending on size and location.
Remove procedural bottlenecks and expand supply
According to Ministry of Construction figures, demand for rental premises rose sharply from the start of 2022, but new supply remained very limited. Most office building projects had not yet been completed to add capacity to the market.
Most new supply came from leasable areas in mixed-use buildings, and even that was limited.
The rent for premises increased about 10% from Q4 2021 and 5% from Q1 2022. In Hanoi, Grade A office space cost around VND 650,000/m²/month and Grade B around VND 350,000. In Ho Chi Minh City, Grade A was around VND 1,050,000 and Grade B held relatively steady at VND 600,000/m²/month.
For commercial premises, average asking rents for ground and first floors in Hanoi were VND 550,000/m²/month outside the center and VND 2,500,000 in central areas. In Ho Chi Minh City, they were VND 850,000 outside the center and VND 3,100,000 in central areas.
A representative of the Ministry of Construction's Housing and Real Estate Market Management Agency said occupancy of commercial space in shopping centers and large supermarkets rose slightly from the previous quarter and stayed high at 90–95%. Landlords' incentives encouraged businesses to return. Street-front shops also gradually reopened, while closures and transfers became less common.
Batdongsan.com.vn data also showed that in-person office work resumed from Q2 2022 and listings for office and commercial premises for lease increased. In major cities, listings for private houses and townhouses rose more than 30% in Q2 from Q1, with the strongest search demand for street-front properties used for business.
In practice, rental demand was high but market supply remained limited. Unresolved administrative obstacles and lengthy construction permitting were among the reasons projects were delayed.
Nguyen Van Duc, Deputy General Director of Dat Lanh Company, said licensing involved many steps. Although called a one-stop process, businesses effectively had to pass through the Department of Construction, Department of Planning and Architecture, and Department of Planning and Investment, delaying permits and projects and discouraging some firms.
Vietnam's economy was recovering strongly after COVID-19, and property companies were restarting activity across segments. Demand for rental space in projects had grown sharply while supply remained constrained. Resolving administrative issues, including permits and land-use fee calculations, was therefore necessary to expand supply and improve the business and investment climate.
Excerpted from: Doan Thanh — Kinh te & Do thi Newspaper
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Address: No. 3 Le Trong Tan Street, Khuong Mai, Thanh Xuan, Hanoi
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