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Office rent is escalating, businesses relocate offices to suburb areas   2011-01-05 - Viet Nam Net

While the office rent prices of A and B-class buildings in Hanoi tend to decrease due to the profuse supply, the rentals of private run offices in the inner city have been continuously  increasing.




An officer of a company located on Ba Trieu in Hanoi said that the building developer has asked for a15 percent increase in rent, commencing from early 2011. The company currently has to pay several billions dong a year in rent, and if the rent increases by 15 percent, the company will have to pay hundreds of millions dong a year more.


According to the officer, the house leasing contract has been renewed every five years. Under the contract, the rent can increase by 15 percent at maximum during two years. “Now they have reasoned sharp price increases to justify pushing the rent up. We have been pushed into a dilemma,” he said.


The managers of the company have decided to relocate the head office to suburban areas, because they say they cannot afford such high rent.


Representatives from a company that provides translation services, that was located at the corner of To Hien Thanh and Nguyen Binh Khiem streets in Hai Ba Trung district, related that several years ago, the company signed a contract to lease 20 square meters of the building at a stable rent of $700 a month (11.5 million dong). In the third quarter of 2010, the building’s owner raised the rent to 15.4 million dong a month ($800). The company accepted the new rent. However, the decision could not help the company stay at the place. It had to leave the building after a perfume company agreed to pay $1400 a month to lease the premises.


“The premises for retail points and showrooms in the central districts, especially advantageous positions remain very rare, and the prices have been moving up steadily,” said Do Viet Phuong, an executive of MegaLand on Ngo Quyen street in Hoan Kiem district in Hanoi.


According to real estate trading floors, the end of the first quarter and the fourth quarter are always the time for businesses to relocate their offices. Now, when the leasing fees offered for main streets in Hoan Kiem district have reached $125 on average, a sharp increase in comparison with $80-90 per square meter, businesses tend to move their offices to areas where the leasing fees are lower.


Land prices increase in accordance with gold prices


The Hanoi market report released by Collier real estate consultancy firm said that if compared with 2009, a A-grade office rental in 2010 further decreased by 4.5 percent. It is expected that the total supply of A-grade offices in 2011-2012 will increase by two folds.  Therefore, it is doubtful that the prices will keep increasing.


Local newspapers recently reported that local residents have demanded sky high compensation levels for site clearance for the project on high grade trade and an office center at the corner of Hai Ba Trung and Hang Bai street: one billion dong per square meter of land. As such, after six years of negotiation, the compensation level soared from 42 million dong per square meter to 600 million dong in December 2010.


Meanwhile, people still argue that the required one billion dong is not an overly high level. Ten years ago, 100 taels of gold could be purchased with 500 million dong, while in order to buy 100 taels of gold now, one would have to pay four billion dong. It is clear that Vietnamese people still have the habit of calculating land price in accordance with gold prices.


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