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ECONOMYREAL ESTATE

Hanoi’s property market in Q4/2018 sees strong demand in all segments

Updated at Thursday, 10 Jan 2019, 15:34
The Hanoitimes - The strong demand was supported by the relocation and expansion of office space among big companies, mainly multinational corporations.
Demand for real estate in Hanoi in the fourth quarter (Q4) of 2018 grew strong in regards to offices, retail space, and residential thanks to good economic indicators during the year, according to Jones Lang LaSalle (JLL) Vietnam. 
 
Illustrative photo
Illustrative photo
Office: sizable deals 

Grade A and Grade B offices saw sizeable deals in recently completed buildings regarding leasing purposes. 

The strong demand was supported by the relocation and expansion of office space among big companies, mainly multinational corporations.

The demand for premium office space is expected to grow albeit at a slower pace as new supply will be completed by Q1 2019.

 
Office stock in Q4/2018. Chart: JLL
Office stock in Q4/2018. Chart: JLL

Total stock remained unchanged on quarter at more than 1,916,361 square meters (sq.m) during Q4. Hoan Kiem district is the leading location in terms of office supply, followed by Dong Da district. By the end of 2019, approximately 153,000 sqm is expected to come on stream and more in 2020-2021 with more than 88% from Grade A.

The total net absorption was mainly underpinned by recently completed buildings, at nearly 29,900 sq.m in Q4, of the total, the net take-up of Grade B office accounted for more than 79%, mostly driven by new supply.

In terms of rent, given buoyant market in Grade A office segment and limited premium supply, some Grade A buildings in CBD area, with high occupancy rate continued to increase the asking rents. The average rent is estimated to increase slightly in the next quarter, thanks to healthy demand and positive economic background.

Retail: demand remains active

The demand remained on the rise driven by various promotional activities. As a result, the total net absorption recorded at 43,488 sq.m with the significant contribution of new supply in the non-CBD sub-market. 

The retail market ended the year with three shopping centers coming on stream, bringing total stock to approximately 1,039,000 sq.m as of end 2018, including Vincom Metropolis Lieu Giai with a total retail space of 30,018 sq.m launched in December. 

The number of convenience stores continued to rise as more than 900 sq.m has been added to total existing stock, mostly contributed by the US convenience store chain namely Circle K.

 
Retail stock in Hanoi in Q4. Chart: JLL
Retail stock in Hanoi in Q4. Chart: JLL
The stock is likely to hit 198,300 sq.m in 2019, including more than 29% of total retail supply from Cau Giay and Ha Dong districts. Aeon Mall Ha Dong is expected to contribute 74,000 sq.m. All new supply is located in non-CBD area.

New supply may put pressure on rent as the retail market is likely to witness an intensified competition, mainly in non-CBD sub-market.

In Q4, prime retail market remained stable with the rental rate was recorded at US$40.7/sq.m per month.

 
A low-cost project. File photo
A low-cost project. File photo
Residential: affordable and mid-end contribute 97% of new-launched market share 

Affordable and mid-end remained the major contributors to new launches with 97% of the market share.

 
Stock of affordable and mid-end. Chart: JLL
Stock of affordable and mid-end. Chart: JLL
The total supply stayed around 37,600 units, including more than 9,200 units marketed in Q4, down 16% on quarter. Affordable segment moved at a fastest pace, with an increase of 3.6% on quarter and 8.6% on year among the existing supply.   

Sub-urban Gia Lam district for the first time recorded the highest new supply with more than 3,400 units launched in Q4.  

In terms of occupancy, take-up totaled 8,252 units, down 21.8% on quarter. Mid-end segment accounted for 54% of the total. Regarding location, Gia Lam led the sales with 2,050 units, followed by Hai Ba Trung and Hoang Mai districts with an average of 1,000 units each.

The prices grew more considerable with the non-chain-link price in the primary market improved 1.8% on quarter, to approximately US$1,394/sq.m benefited from good construction progress with better integrated facilities. 
 
The chain-link price in the secondary market further dropped by 0.6% on quarter, mostly driven by long-standing projects with deteriorating conditions.  
Upcoming residential stock in Hanoi. Chart: JLL
Upcoming residential stock in Hanoi. Chart: JLL
Outlook of the residential is significant for 2019, mainly in affordable segment as the market is expected to welcome about 48,000 new units by the year-end. 

New launches seem to switch focus to the East region thanks to the recent improvements in infrastructure connecting to the CBD.

Accordingly, price uptrend is expected to continue in the coming year and low-end units are expected to have positive sales rate.
Linh Pham
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