The property market in Hanoi is seeing a decline in both demand and rental rates of office, serviced apartments and hotels, in contrast to the residential segment, a recent survey has found.
The survey, done by the CB Richard Ellis Group, the world's largest commercial real estate services firm, found that monthly office rents have declined slightly in Grade A buildings, with a 3.55 percent drop quarter-on-quarter at $42.16 per square meter.
Existing buildings in the Grade B market have seen rents remain stable. When the Capital Tower, which opened at above average market rental levels, is included, the overall Grade B market rents increase 3.5 percent to $26.77 per square meter.
In the Grade B market, net absorption was 5,984 square meters of space while it was 2,027 square meters in Grade A this quarter.
Landlords across all sub-markets have been hesitant to adjust rental rates but an increasing supply of office space continues to put downward pressure on prices.
Regarding serviced apartments, the survey said that three and four bedroom units are still suffering the largest vacancies due to the availability of villas and terraced housing.
"In the next year, the serviced apartment sector will receive increasing competition from alternative accommodation options with many high-end and luxury condominiums handing over. This increased supply may put pressure on achievable price levels, especially for self-managed buildings with limited services," said Richard Leech, executive director of the CBRE Vietnam.
In order to meet expected levels of supply, the total number of expatriates in Hanoi will need to increase substantially over the next two to three years, coming closer to levels in Ho Chi Minh City, he said.
Together with the decline in the international visitors in the first quarter, five-star hotels saw average daily rates (ADR) drop over 18 percent compared to the same period last year to $118.
ADR for three and four-star hotels were $39 and $64, up 8 percent and down 3.5 percent respectively over the same period last year.