The office market is not just a matter of price competition.

According to information from the Ministry of Planning and Investment , as of April 20, 2024, the total FDI capital in Vietnam reached more than 9.27 billion USD, an increase of 4.5% over the same period in 2023. Up to now, the whole country has 40,049 valid projects with a total registered capital of nearly 478.58 billion USD. Foreign investors have invested in 17 out of 21 sectors of the national economy.

In particular, the business confidence index in Vietnam has witnessed an increase. In the first quarter of 2024, the business confidence index from the European business community in the Vietnamese economy reached its highest level since 2022, reaching 52.8. This demonstrates the growing attractiveness of Vietnam, especially with proactive, investor-focused policies and continuous efforts to improve the stability and global competitiveness of the market.

The growing FDI inflow and diversification of industries, along with the continued positive business confidence index, have shown that Vietnam is a potential market for many types of businesses, thereby leading to an increasing demand for offices.

Office leasing activities are also very active. For example, in the first quarter of 2024, the Hanoi market recorded that IT tenants occupied the largest area with 71% of the leasing transaction area. This was followed by tenants in the Manufacturing industry with 17% and Law with 12%.

FDI enterprises are a strong source of demand in the office market.

In particular, the trend of choosing an office for tenants depends on many factors and price is not the only factor that businesses consider, especially for tenants who tend to upgrade their offices to Class A buildings. For many companies, moving to green-certified office buildings is a top priority or even a mandatory requirement, as it is part of their global ESG commitment to their shareholders and related legal regulations.

Sometimes companies are willing to pay a premium for a better quality building with green certification, which provides a productive working environment for employees and a positive brand image for customers. So while price is obviously a very important factor, it is not the deciding factor.

According to Mr. Matthew Powell, Director of Savills Hanoi, this unit has also noted the difference between green-certified buildings and non-certified buildings. Old buildings that do not meet green standards will now face greater pressure to reduce rental prices when they cannot compete with green-certified buildings. Evidence is that some landlords, especially for class B offices, have had to reduce rental prices to retain customers, causing gross rental prices in the Hanoi market in the first quarter of 2024 to record a slight decrease of 1% quarter-on-quarter and 2% year-on-year.

“Price is obviously important. But like anything else, many people are willing to pay for quality experiences. Just like buying a car, clothes or handbags, sometimes a price difference is acceptable for higher quality products and services,” said Matthew Powell.

High quality office space sought after by many tenants

However, although price is not the key factor, discounts are the most mentioned incentives in retaining tenants. Regarding this issue, Mr. Matthew Powell said that the investment cost for green buildings is a long-term investment cost. Meanwhile, the story of discounts is a short-term story.

Because office tenants often use the office for a long time, at least 5-10 years, or even longer. Therefore, sustainably developed green office buildings are an extremely important factor for investors to retain tenants for a long time. Thus, the current problem for investors of green projects is long-term investment.

Source: https://www.congluan.vn/thi-truong-van-phong-khong-chi-la-bai-toan-canh-tranh-ve-gia-post294819.html