Rental space market: Supply exceeds demand, prices decrease

(Baonghean) -Due to thousands of businesses dissolving, going bankrupt, and reducing production, the rental market is increasingly sluggish. Investors have focused on services and lowered prices, but from street-front offices to high-rise office buildings, they are still "waiting with long necks" for tenants...

In recent years, instead of choosing private houses to set up company headquarters and representative offices, many businesses have chosen locations in buildings with the function of operating in the field of office rental, creating conditions for this market segment to develop. Through understanding the psychology of units that have set up headquarters in high-rise buildings and commercial centers, choosing to set up offices here gives businesses many advantages, such as having a clear, stable address, convenient for transactions as well as finding new partners and transactions.

Along with renting premises, businesses also enjoy many other convenient services of the building such as parking, security, conference rooms... There are large-scale rental buildings with a diverse number of tenants, many fields, the units renting premises right here also enjoy mutual services such as banking, postal services... However, in the current economic recession, with the freezing of the real estate market, the number of businesses closing down is increasing, so office rental services are becoming gloomy.

Located right on Dinh Le Street (Hung Dung Ward - Vinh City) - a place with high population density with many government agencies, but the 5-storey Duc Phong office building currently has only 1 of 3 rooms on the 1st floor rented for 10 million VND/month. Ms. Nguyen Thi Hien, the owner of this office building, said that 2 years ago she invested nearly 10 billion VND to build the building for the purpose of renting. Initial calculations showed that if the entire area was rented, Ms. Hien could earn hundreds of millions of VND per month... However, due to being put into use at a time of economic difficulty, after many times of posting advertisements and hanging discount signs, the building still has many vacant areas. "Three years ago, it was very difficult to find an office space at that price, but now we are constantly reducing prices but still have difficulty finding customers. Companies that used to rent hundreds of square meters now only rent a few dozen square meters, so the larger the rooms, the harder it is to find customers. To maintain the capacity of each rental building, reducing prices is not the only way. In addition to improving services, landlords must also cooperate with tenants to see what they are not satisfied with and do better to retain them," added Ms. Nguyen Thi Hien.

The sluggish situation is not only happening to premises in high-rise buildings and commercial centers, but also to retail premises including shops and kiosks on the street. Due to the lack of customers, the asking rent is constantly "going downhill", but many shops still have to close and return the premises. Committing not to increase the price compared to the 2011 contract, Mr. Nguyen The Dung, the owner of a shop on Nguyen Van Cu Street, was still refused to continue renting. "The house has been vacant for a long time, I had to lower the price from 7 million VND to 6 million VND per month, collecting rent every six months but no one asked," said Mr. Dung.

Ms. Nguyen Kim Anh (in block 3 - Trung Do ward) is in a rather tragic situation. She signed a long-term lease contract on Nguyen Du street to open a coffee shop, but due to poor business, she had to find someone to transfer the entire store at a cheap price. "I signed a 2-year lease contract on Nguyen Du street to open a coffee shop, and had to pay the rent every 6 months. Calculating the rent and the investment for the shop, I lost more than 100 million VND. But due to the lack of customers, while the rent still had to be paid regularly, I had to accept to transfer it to someone else at a preferential price, such as leaving all the equipped facilities and a house lease contract for 60 million VND, but for more than 2 months now, no customers have come to ask" - Ms. Kim Anh lamented.

According to our observations, along many inner-city streets, signs "Shop for rent", "Office for rent", "Looking for sub-tenants", "Need to transfer"... are appearing quite a lot. In a stretch of less than 1km on Nguyen Van Cu Street alone, there are 3 street-front houses hanging signs looking for customers with contact phone numbers. Roughly counting, the entire street above has 6 premises looking for tenants. The same situation also occurs on some other streets such as Minh Khai, Le Hong Phong, Nguyen Du... According to research, the average rental price for premises is from 4 - 6 million VND/month, depending on the area and location. In some "golden land" locations such as Minh Khai, Quang Trung, Tran Phu streets, the rental price is over 15 million VND/month...

Mr. Nguyen Duy Dong - Director of Dai Phu Real Estate Consulting Company said that the rampant development of high-rise buildings in recent times was due to the "price increase" of high-rise buildings for rent since 2008-2009. When the office rental market created a fever, many investors rushed into investment without planning, causing "overwhelming" now. According to Mr. Dong, currently, some businesses and people, due to business losses, do not dare to risk renting premises for business. On the other hand, those who are renting want to minimize costs to avoid losses, so they have proactively sought out premises with low prices. "To warm up the office, premises, and store rental market depends on many factors, but the immediate way to "save each other" is to reduce rental prices even more. Only when product prices are partially reduced can the market be stimulated again." Mr. Nguyen Duy Dong shared:

The current sluggish situation may not improve anytime soon as the supply of office space for rent is increasing. As the economy is forecast to continue to be difficult, the office rental market will face many pressures in the coming time.

Ngoc Anh