Sunday, April 20, 2008

Companies save rent by moving down the alley

With high prices and a shortage of office buildings for rent, companies are looking for alleyway houses to set up office, and, in the process, driving up their value.
It used to be that only small companies were located in alleyways, but more and more big and foreign firms are opting for the lower rents, according to real estate companies.
Most want to rent in Districts One and Three. Even if the locations are not on a main street, the alleys need to be large and open.
Companies prefer those that are at least 8 to 10m wide. Buildings should still offer basement car parking.
Rental prices for such houses cost US$15-20 per sq. m a month, an increase of 1.5 times compared to one year ago, said a director of a real estate company.
Office houses in smaller alleys are renting for $10 per sq. m a month while villas are going for $8 per sq. m a month, according to real estate companies.
Although they are large and airy, villas have to be remodelled to become a working space. The extra costs of transforming them lowers their rental value. However, villas in the city centre, such as in alleys off Pham Ngoc Thach, Phung Khac Khoan and Ngo Thoi Nhiem streets, have much higher rental prices.
Nguyen Ngoc Tien, director of Phuc Duc Real Estate Investment Company, said several alleyway house owners had recently transformed their houses into office houses for rent.
With current rental prices, owners can recover their capital and begin making a profit in five to seven years, Tien said.
Office houses usually have a minimum land area of 160 sq. m and are located in alleys at least eight metres wide, he said.
Real estate experts, however, warned that these rental prices will likely go down once several large office building under construction are completed.
Alleyway house owners should keep this in mind, real estate experts said.
These owners should design their houses for multiple purposes, for rental as an office or as a hotel, real estate experts said.
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