HCMC office market set to become tenant-favorable in 2023

VI EN

Ho Chi Minh City’s office market is likely to witness a transition from a landlord-favorable to a tenant-favorable sector in the new year, according to data released Friday by Knight Frank Vietnam.

Capping off a year that proved solid for landlords, this fourth quarter saw moderate year-on-year rent increases for Grade A landlords to the tune of 2.6%, and a positive net absorption mostly coming from the Saigon South sub-market in HCMC, Vietnam’s largest economic hub, according to the real estate firm.

However, the dawn of the new year is set to bring with it a parade of new inventory, with city-wide Grade A and B office space to rise by 333,387 square meters in the next two years, representing a 23% increase in total inventory with the first new projects expected to come online in Q2 of 2023.

This is set to offer reduced asking rents from landlords to the tune of about $2 per square meter per month from the current city-wide averages. Current data places Grade A office space averaging $57.73 per m2 per month with a vacancy rate of 5%. Knight Frank is predicting those rentals to fall to around $55.5 per m2 per month, while vacancy rates will rise significantly to around 20% by the end of 2024.

Grade B occupiers are set for even more favorable tenancies with average rents – currently $33.68 per m2 per month – projected to fall into the $27 per m2 per month range in the same period.

The entire economy is seemingly on tenants’ minds as well, according to Leo Nguyen, director of Occupier Strategy & Solutions at Knight Frank Vietnam, with occupiers weighing up their options for relocation, expansion, and flexible working locations against a backdrop of potential economic headwinds in the quarters ahead.

“Particularly with Grade A tenants, we see a shift toward cost-conscious decision-making processes in their selection of office space as they attempt to balance their need for quality, green-accredited, and centrally located buildings with their need to navigate potential economic uncertainty in the near future,” he said.

The firm’s data highlighted several key sectors as driving demand for office space around the city this year, with logistics (19%), financial services including banking and insurance (16%), and technology (14%) dominating the major transactions for the year and proving themselves as the industries with the highest appetites for central office space; and it should be noted that these sectors normally have modest rent budgets.

HCMC’s fringes continued to offer good value to space-hunters, notably in terms of its Grade B offerings, with favorable rents in the $27-34 range considered a worthwhile trade-off for the additional commute times in the central business district.

The city’s Saigon South has also emerged as a tenant-favorable sub-market, according to Knight Frank. In the area, rents average $22.4 per m2 per month along with highly sought-after larger floor plates offsetting a less-friendly commute for many staffers while offering excellent local amenities and cityscape.

Flagged as Grade A space to watch, the emergence of the two towers of Thu Thiem Peninsula – just a three-minute bridge-hop from downtown HCMC – are set to reframe much of the conversation over the city’s commercial property sector, said Leo.

“These buildings, along with several other high-profile developments in the central business district, will shift the overall market situation from landlord-favorable to tenant-favorable,” he added.

“Landlords looking to attract tenants from 2023 onward will need to look closely at possible renewal rates, where typically tenants have a capped renewal rent offers in their leases which would be lower than the new buildings.”

news relative

VIETNAM REAL ESTATE INVESMENT MARKET OVERVIEW AND OUTLOOK Q2.2023

Stable rental prices were observed in the office market of Ho Chi Minh in Q2 2023.However, the occupancy rate slightly decreased compared to the previous quarter, with Grade A offices reaching 92% and Grade B offices achieving 75%. Additionally, the average rental prices remained relatively unchanged, with Grade A offices ranging from 41-67 USD/sqm/month and Grade B offices around 36 USD/sqm/month. New projects entering the market in outer CBD areas showed a promising occupancy rate of approximately 20-25%. Furthermore, investor are actively seeking tenants, and it is expected that the occupancy rate will increase in the near future.

Why Are Offices Still Important in the Digital Age?

New technologies are changing the way companies work and compete with each other. Technology is not only affecting how companies work but have made an impact in working spaces too. In the past three years, we have seen growing trends of open workspaces and even virtual offices. Although the concepts of virtual offices and open workspaces have some merits and may cater to the needs of working, the traditional concept of ‘the office’ retains many of its benefits

9 tips for maintaining a healthy work-life balance

Maintaining a work/life balance is easy when you’re a sole trader, right? You typically work from home and you have no one else to answer to, so it should be easy to switch off. Unfortunately, that’s not always the case. In fact, many home-based sole traders struggle to strike a healthy work/life balance because the lines are more blurred.

5 Habits That Will Boost Your Workplace Productivity

The workplace and workplace experts have never been more focused on productivity and maximizing it than ever before. The pandemic and the switch to remote work have posed some serious conundrums when it comes to keeping people focused, motivated, and high-performing.

Việt Nam hopes to attract more capital from South Korea

In the next one to two years, the two countries can fully realise the "Dual Goals", which aims at the the milestone of US$100 billion in bilateral trade turnover and total accumulated investment.

Ho Chi Minh City plans to resume all economic activities after January 15, 2022, what should enterprises do to re-start their business?

By cafef.vn, HCMC plans to reopen all economic activities after January 15, 2022 in a three-phase roadmap through a so-called “Covid-19 card”. In addition, the City also offers many solutions to support enterprises recover their business and manufacturing after the Covid-19 pandemic.

CJ BUILDING

2 Bis - 4 - 6, CJ BUILDING

No. 6 Le Thanh Ton street, Sai Gon Ward, HCMC

Tel: +84 28 6255 6800 | Fax: +84 28 6255 6801

Email: leasing@cjbuilding.com.vn