Office: Rental Modes and Costs
Latest Update: June 10, 2021
This is relevant for: Companies looking to move their office
Generally, there are two types of office spaces available: Traditional offices and co-working spaces.
Traditional offices are the cheaper option for long-term engagements in the market. They also allow for a more individual fitting-out and style. However, they are quite inflexible regarding changing needs of the tenant. Typically, rental contracts in Vietnam are closed for three to five years.
Real estate agents are dividing offices into three quality tiers: Grade A, B and C. Grade A is supposed to be the highest standard while Grade C is the lowest. A Grade buildings are typically well-known such as Deutsches Haus in HCMC or Lotte Center in Hanoi. They offer highest security standards, double-flooring and lately also high energy-efficiency. Of course, this comes at high costs and Grade A buildings are comparatively rare. Nevertheless, companies looking to retain personnel or welcoming customers they'd like to awe show high interest into Grade A. However, the market is dominated by B and C grade buildings. There are some pretty decent Grade B buildings, especially those recently built or refitted. So these might be viable alternatives to Grade A. Grade C is mostly irrelevant for international investors. The costs might be low, but quality is, too. Security issues and missing fire fighting standards might cause headaches to management.
It must be mentioned that this classification is only done once when the building is marketed first. Hence, a 20-year-old Grade A building may be perceived a lower standard than a modern Grade B building. Pricing diverges accordingly. Older Grade A buildings will often be cheaper than newer Grade B buildings.
Regarding pricing, HCMC is by far the most expensive office market. Hanoi and Da Nang offer basically the same pricing. For other cities the data is patchy but prices should be on par or below Hanoi and Da Nang. Overall, there is not enough supply in the Vietnamese office market. Hence, prices are comparatively high. Occupiers should calculate with roughly 8 to 9% in yearly rental increases. Grade C is not mentioned here because of irrelevance (see above), pricing can however be very competitive with as low as 5 USD/sqm.
Overview: Ø Rental Prices in USD
*Pricing for Hanoi/HCMC from CBRE, for Da Nang from “Office Da Nang”, status: Q2/2021. Excl. VAT/Management fees
Apart from the rental prices, most landlords will also charge so-called “management fees” which cover general expenses for the building such as security, upkeep etc. These fees can substantial. An occupier should calculate with roughly 5 to 7 USD/sqm (these fees will be fixed in the rental contract).
When deciding on an office, a tenant should put a close eye on the professionalism of the office building’s management staff. Furthermore, bike parking should be either inside or roofed because otherwise the saddles will become hot in the sun or the bike will be wet during rain. Security measures may also play a crucial role to prevent unauthorized access. Fire safety typically is closely monitored by the public fire fighting department, so in a professional office building this should not be an issue (we heard of issues in Grade C though). Energy efficiency is not (yet) a major topic in most buildings. However, this is not a big challenge as electricity bills rarely exceed a thousand dollars per month even in larger energy-inefficient offices.
Fitting-out costs are highly dependent on the wishes of the tenant. There are companies offering very competitive pricing as well as high-end players providing innovative design and best quality. A price range between USD 300 to 600/sqm incl. furnishing and VAT might be applicable for foreign investors. Some notable fitting-out companies are:
The search for offices should be done in cooperation with a real estate agent. In HCMC, Hanoi and Da Nang, big players such as CBRE, JLL and Savills can be deemed good partners. In other cities tenants will however have to rely on smaller agents. For market research (and contacts) information may be found here:
👩💻 Co-Working Spaces
An alternative to traditional offices are co-working spaces. These have sprung up all over the major cities. Besides the typical open plan setups, they also offer smaller office spaces which can house smaller teams. There are diverse companies in the market with big brand names such like Regus and WeWork as well as many local players. Prices for the high-quality spaces can be as high as USD 100/sqm/month. Tenants should however be aware that they save rental space because renting of common areas such as reception desk, coffee corner etc. is not necessary. This mitigates the pricing a bit. Further, co-working spaces of course offer much more flexible rental agreements.
Please consider this information without liability for any data with respect to content, completeness or up-to-datedness.
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