Contradictions are taking place in the market of leasing real estate. While hotel developers are happy with high numbers of clients, office leasers cannot find any clients.

Offices left idle

Banderoles with the words “offices for rent” are hanging at many buildings in Hanoi, including the ones on Tran Hung Dao, Le Duan, Lang Ha and Nguyen Chi Thanh. The leasers these days offer many attractive conditions in order to attract clients. Leasees can sign long term contracts with the leasers, while they can also set many other terms. Calling numbers given on the banderoles, people will be fully and carefully accommodated by representatives of real estate development companies. If the callers say they “need some more time to think”, in the following days they will be bombarded with calls from leasers, who try to persuade clients to sign leasing contracts.

The officer of a building on Tran Hung Dao Street in Hoan Kiem District in Hanoi said that his B-class offices are quoted at $27 per square meter per month. However, as the percentage of occupied offices is still modest, clients now can negotiate with the company’s leaders about the rents, and they will be able to choose the offices and the floors they want.

The problems in the post-crisis period and the economic downturn have been cited as the main reasons that explain why businesses still dare not expand their networks or scale of operation. Besides, experts also said that the “golden age” of office leasers is over after the leasers applied too “conservative” policies on rents and leasing conditions in the past few years.

Now office leasers not only are struggling to look for new clients, but they are also facing the leave of many existing clients. The problem is the supply is profuse and there are too many choices for clients.

Phan Tuan Anh, a senior executive of a software company, which is now located on the first floor of the building on Nguyen Thi Dinh in Trung Hoa-Nhan Chinh urban area, said that his company will relocate to Xa Dan street after Tet. The new office will be closer to the central area of the city, while the rent is the same as the rent for the building on Nguyen Thi Dinh street.

According to CBRE Vietnam, a real estate service provider, by the end of 2010, with 39,000 square meters of A, B and C-class offices to be put into operation, plus the 8000 square meters of idle offices, the unoccupied ratio of A-class offices has increased to 17.9 percent, while the ratio of B-class offices is 15.3 percent. This has led to a 5 percent decrease in the A-class office rents.

Director of a company which has offices to lease on Lang Ha street revealed that the total idle area of the building has reached 1500 square meters on three floors. More importantly the offices have been left idle since August 2010 and with such an area unoccupied, the company loses 75 million dong a month (25 dollars per square meters).

According to Knight Frank, also a real estate service provider, in 2011, office leasers will continue to face big difficulties when a large number of offices will be marketed. These include the office buildings in the west of the city, such as Keangnam Tower, Crown Plaza Complex, or Hadinco Tower.

Hotels have “bountiful crop”

Meanwhile, hotels have witnessed prosperity in their business. This is due to the fact that Hanoi had many important events in 2010, especially the 1000^th anniversary of Thang Long-Hanoi.

During those days, all 6618 hotel rooms in Hanoi were booked. Especially, the revenue per available room RePaAR was higher in comparison with the same period of the last year. Five star hotels saw the highest RevPAR, an increase of nine percent over the same period of 2009, to $85.5 per room.

It is expected that in 2011, the market will have 1200 new hotel rooms from five new hotels, including two hotels in the central area and three in the west of the city.

C. V