The latest Spotlight: Savills Prime Office Costs (SPOC) has revealed that pricing for prime offices around the world (in US$) has largely held steady in Q1/2023.

London (West End) had the highest office rent globally at US$253.13/sq m/month. Net-effective costs – the “all-in” cost to occupiers – across the 30 studied markets increased by 1.1% in Q1.2023.

Increasing fit-out costs due to inflationary pressures, rising material and labour costs and disruptions in global supply chains. Rents also increased marginally across the world, rising by 1% in the first quarter of 2023.

Like in 2022, markets in the Americas have seen flat rental levels in Q1/2023. Despite rising inflation levels, landlords have not changed rents to attract and retain tenants. Fit-out costs have also increased due to high material and labour costs. Occupancies are also increasingly pressured as firms reassess their space needs in city centres.

In EMEA (Europe, Middle East, and Africa), office expenses also increased by 3% quarter-on-quarter (QoQ) and 9.7% year-on-year (YoY). Amsterdam recorded the highest increase at 18% QoQ. Dubai, Paris, Berlin, and Frankfurt also had increases. Across the region, annual gross rent (inclusive of property taxes and service charges) increased by 2.1%. Occupiers want good-quality spaces and there are new high-end properties on the market, which has naturally supported a rise in prime office rents.

Asian office markets were less volatile in the first quarter. Notably, 5 out of 10 cities with the highest prime office costs in the world are in Asia, making it the most expensive region for global tenants. Hong Kong, Shanghai, Kuala Lumpur, and Ho Chi Minh City each experienced falling costs, but costs in Seoul and Sydney rose. Office costs in Asia increased by 1.2%, which is lower than the 9.7% across EMEA markets. This demonstrates the greater inflation pressure felt in EMEA markets.

Christina Sigliano, EMEA Head of Occupier Services – Director, Occupier Services, Savills UK, shared: “Companies, especially those in the tech field, are evaluating and restructuring their offices to better suit their budgets given the current economic pressures. Given the changes we are seeing in how we work and the size of the workforce, we are seeing more downsizing.”

“However, prime office spaces remain in high demand in many major markets, and rental levels are largely trending upward. Tenants looking to relocate or expand in the next 18 months and beyond should start considering their options now,” she added.

Grade A buildings are in demand, especially those with green certifications and ESG markers, however, stock and the pipeline remain limited. In Ha Noi, green-certified buildings are on the rise because of heightened demand. Tenants are also willing to pay more for properties that support their ESG, sustainability, and net zero targets.

Hoang Nguyet Minh, Senior Director, Commercial Leasing, Savills Ha Noi noted: “Green certifications are becoming the norm with recognised premiums. Old stock must be renovated or retrofitted to avoid obsolescence and to meet rising demand for green offices.”

According to Savills Q1/2023 Market Report, Ha Noi will welcome new green projects soon, including Gelex 10 Tran Nguyen Han, 36 Cat Linh and Tien Bo Plaza. By the end of 2025, the market is expected to have 68,400 sq m of green office space.

Conclusion

With new Grade A projects to enter Ha Noi market soon, tenants will have lots of opportunities to secure premium office spaces. Ease your price concerns with expert advice from Savills leasing team and Hoang Nguyet Minh.

See further:

• Understanding Office Grading in Viet Nam
• 12 Interesting Grade A Office Buildings in Ha Noi
• Unpack Office Rent and Occupancy In Ha Noi