The office markets in Ho Chi Minh City and Hanoi have experienced remarkable development over the past two decades, with annual growth of 12 per cent and 13 per cent.

In the real estate sector, offices are classified into three grades: A, B, and C. The rating system is determined based on a scale of 1 to 100, considering 19 criteria deemed most important for office buildings. These criteria include factors such as commercial density, public transportation, availability, security and safety, ceiling height, ESG (Environmental, Social, Governance) matters, longevity, and quality of management services.

Savills’ newly-updated grading system reflects the current market and pipeline, ensuring transparency and establishing a solid foundation for future development. It prioritizes criteria related to project location, ESG standards, building technical specifications, and management services.

It believes that establishing a standard office rating system helps tenants make informed decisions, aids property owners and managers in implementing processes, assists consulting units in accurately researching and monitoring market trends, and enables developers to create comprehensive development plans.

Vietnam’s office growth reflects the country’s rapid economic development. According to experts from Savills Vietnam, office projects are becoming larger and more complex, and professional management teams are being employed. Urban planning has become more stringent, and infrastructure and connectivity have improved. Offices located in non-CBD now offer higher development standards.

The update also considers that a shift is taking place in the office market. Offices are no longer simply viewed as “space as a commodity” but rather “space as a service”. Therefore, the updated rating system includes several RISE principles. RISE is a customer-focused model that connects customer expectations and experiences. These measures are tangible and based on factors such as experience, engagement, and the environment.

This may change the evaluation of projects, thereby impacting the performance of each segment. For example, projects that improve construction standards and upgrade their facilities will increase the number of Grade A and Grade A non-CBD buildings. On the other hand, older projects, even if they previously achieved high scores, may be downgraded if they deteriorate or fail to meet the required criteria.

To avoid projects downgrades, investors could upgrade and improve aspects such as common areas, air conditioning systems, elevators, parking lots, or amenities, according to the evaluation criteria. Investors can also implement more advanced technology and management programs to improve the building’s scores.

However, the rating segment does not directly correlate with the rental price of the building. For example, Grade A projects located in new urban areas may be classified as “Grade A non-CBD” but have more affordable rental prices. A Grade A non-CBD building may have lower rental prices compared to a Grade B property in the city center.

“While standardization is important, the grading system needs to be regularly updated to reflect the real market conditions,” said Mr. Troy Griffiths, Deputy Managing Director of Savills Vietnam. “Developers need to be aware of these changes and adjust their development strategies to ensure sustainable and successful investment.”