For the third time since January 2017, Hanoi ranked first globally for its CBD grade A office yield at 8.57 per cent, according to Savills World Office Yield Spectrum H22018.
Previous runner-up Ho Chi Minh City dropped to fourth with market yield at 7.36 per cent.
Hoang Nguyet Minh, investment manager at Savills Hanoi said: “High yields indicate attractive rental income against capital value of office buildings and the fact that Hanoi and Ho Chi Minh City are among markets that offer the highest yields globally shows healthy rent and occupancy prospects for our cities.”
“Ho Chi Minh City enjoyed its best performance of the last five years, with average rents increasing 8 per cent year on year and a very high occupancy rate of 97 per cent, while Hanoi recorded a 3 per cent year on year increase in average gross rent in Q4/2018 and steady occupancy rate of 95 per cent with improved Grade A performance in non-CBD areas,” Minh added.
These markets have been drawing significant interest from international investors, Singapore, Japanese and Korean in particular. Buyers’ demand remained high, yet there were very few investment transactions in 2018 due to the shortage of available properties for sale.
A notable transaction was the January acquisition by Nomura Real Estate of a 24 per cent ownership interest in Sun Wah Tower, a Grade A office building in Ho Chi Minh City.
According to Savills Research in previous office yield spectrum publications, Hanoi and Ho Chi Minh City witnessed a downward trend of yields from second half of 2015 to second half of 2018.
This again was caused by the limited supply of available office development for sale, which has resulted in more aggressive bidding prices from buyers, driving yields further downward.
“Office sector is currently a seller’s market in Vietnam; in other words, if you are an office development owner, now is a good time to sell,” said Minh.