Landlords are more concerned with filling office space than looking for the best rental rates, as corporate tenants are seeking aggressive cost reduction plans.
Richard Leech, executive director of CBRE Vietnam, said that landlords were keen to secure reliable incomes, offering lower rents, capital contributions and free rent periods to attract quality tenants for longer leases.
The CEO Tower in Hanoi's Pham Hung road is offering rental prices of $25 to $40 per square metre a month, excluding tax, which is 10 to 20 percent lower than the levels the developers and marketing agents had planned last year.
"Our main concern now is filling the building with tenants, hopefully in three to five months, rather than looking for the best prices," said Doan Van Binh, CEO Holdings' president and chief executive officer. "We have leased 20 percent of the building's space, including two long-term tenants," he added.
For long-term tenants, defined by fixed 48-year contracts, the company offered a price of 27 million dong ($1,500) per square metre, excluding tax.
"Strategic investors who are financially strong will find this deal more attractive than investing in condominiums, as they can buy off a whole floor at less than 15 billion dong ($830,000) and earn substantial profits just by leasing out at the same price that we're offering," Binh said.
CBRE Vietnam last week signed on to be the sole marketing and management agent for CEO Tower, which is developed by CEO International and will be completed in July. The tower will provide 13,000 sqm of office space for lease, spanning across 27 floors.
Leech said that being the first higher-end office building in the market this year had given CEO Tower many advantages, and its business outlook would get better towards the end of the year as the market recovered.
CEO Tower offers 500 to 630sqm per floor and allows a maximum of three tenants per floor. It also features two basement floors for parking. The building is located in a highly developing area, where plenty of office buildings have been cropping up.
Leech said that the office market in Hanoi was slowing down, with rising vacancies and falling rents, mostly because of fewer new entrants. However, "it is a good time for tenants to take spaces at reasonable prices, something that Hanoi has lacked for many years," he said.
Two other grade-A buildings were expected to come online this year downtown, including Capital Tower on Tran Hung Dao street and Bidv Tower on Tran Quang Khai street, with a combined stock of 46,000 sqm. Proposed rents for these two buildings are expected to be between $50 and $60 per square metre per month.
Vacancy rates in Hanoi's grade-A office buildings were around 3 percent, but the level in grade- B buildings had reached 2 percent, as market supplies ha increased over the last couple c months.
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