Businesses renting apartments as office space will now have to relocate, following the release of an official document from MoC.
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| In Hanoi, many apartments are leased as office space. Photo: Viet Tuan. |
The Ministry of Construction (MoC) has recently sent management boards of apartment blocks a notice forbidding the lease of apartments as office space. Companies now doing so must move by July 30 and most are worried about finding and renting new premises. Regulations for apartments rented as offices have sparked controversy for some time.
Document No 2544/BXD-QLN dated November, 19, 2009, contained regulations from MoC on the management and use of apartments. Deputy Minister of Construction Nguyen Tran Nam said that many apartment owners had changed the purpose of use and leasing apartments to businesses as offices or production bases ran contrary to legal regulations. Offices and production bases in residential neighbourhoods undoubtedly create disorder and directly affect the daily lives of local families.
MoC received much feedback from investors and business using apartments as offices after the Document was released. Both investors and businesses say they will strike difficulties, as businesses must seek new locations and investors will suffer a major revenue loss.
According to Mr Nguyen Hung from the Department of Personnel and Administration of a securities company in an apartment in the Trung Hoa - Nhan Chinh area in Hanoi’s Cau Giay district, his company and many others rent apartments in the block as office space. It’s a cost-effective option for many small- and medium-sized enterprises (SMEs). “The regulation will create problems for enterprises and investors,” he said. Previously secure in the knowledge they have a long-term lease, enterprises now face instability. “Finding a good location at a reasonable rental price is quite difficult at the moment,” he said.
In Hanoi, many apartments are leased as office space, in the My Dinh and Nam Trung Yen areas and on Lang Ha and Nguyen Chi Thanh Streets and elsewhere. Mr Nguyen Trung Hieu, Director of a private company in an apartment block on Nguyen Chi Thanh Street, said that office rental prices are very expensive, at about $3000-$4000 per month. A private company of small scale, like his, is unable outlay such expenditure on office rentals. “Leasing an apartment is the best solution for us,” he said. His company and many of its partners are unhappy with the regulations.
Ms Phan Nhu Thao, Director of the Contribution Cosmetic Company in an apartment in Nam Trung Yen, is looking for new office space now that she can no longer rent the two-room apartment her company has leased for two years. She has asked friends, partners, and family for information about affordable office space. “I want to find a private house because rentals are not as high as office buildings,” she said.
Among people living in apartments, however, the regulation has broad support. There are problems, they say, with living next to a business. Mrs Nguyen Thi Nhung, who lives in Trung Hoa - Nhan Chinh, complained that the elevator was always crowded and the block was noisy and full of strangers. Another resident said that the apartments were designed for families, not for a company employing dozens of people and welcoming visitors. It leads to overloaded electricity and water supplies, making fire prevention more difficult.
According to Mr Nguyen Manh Ha, Director of the Housing Management Bureau under MoC, the purpose of building apartment blocks was to meet the needs of people for accommodation, not for providing office space. MoC has already reminded people’s committees in cities and provinces about fully carrying out the details of the Document. The notices being sent to management boards of apartment blocks is evidence that it is taking the matter seriously.
With the office space market being quiet, SMEs having to find new offices is probably a good thing. According to CBRE Vietnam, in the second quarter rental prices for Grade A office space fell 5.34 per cent compared to the first quarter. Grade B space, meanwhile, fell 7.95 per cent and Grade C 3.12 per cent. But according to Mr Do Viet Phuong, head of office leasing at the Mega Real Estate Company, enterprises may be able to find Grade C office space but it’s still too expensive. But office rental prices are actually falling because supply exceeds demand. Many enterprises are now looking at Grade C space. Some real estate analysts predict there will be changes in the time to come, as business registration and tax reporting cover rental space.
Meanwhile, MoC said the Document was issued to correct the implementation of the Housing Law. It will request local authorities release concrete regulations on the process of removing offices from apartment blocks.
