The office vacancy rate has risen, while lease transactions—primarily involving relocations—continue to account for a significant share, with nearly 48% in Ho Chi Minh City…
Compared to the previous year, the vacancy rate for Class A office projects in Ho Chi Minh City in 2023 still rose by 12.5 percentage points, reaching 18.6%, while the vacancy rate for Class B projects increased by 1.4 percentage points, reaching 10.1%.
Tenants are moving out a lot
According to CBRE Vietnam, 2023 was a year of the highest office supply growth in Ho Chi Minh City since 2019, with nearly 170,000 sqm of newly completed leasable area, primarily consisting of favorably located Grade A office projects.
CBRE statistics show that throughout 2023, Ho Chi Minh City recorded nearly 80,000 square meters of office space absorption, with more than 90% of this area coming from four newly completed Class A buildings. However, over the past year, relocation transactions continued to account for a significant share, totaling nearly 48% in Ho Chi Minh City. The majority of these transactions were aimed at moving to newer, higher-quality offices with competitive rental rates. Consequently, the vacancy rate for Grade A projects increased by 12.5 percentage points to 18.6%, while the vacancy rate for Grade B projects rose by 1.4 percentage points compared to the previous year, reaching 10.1%.
JLL Vietnam also noted an increase in the office vacancy rate in Ho Chi Minh City; specifically, the vacancy rate for Class A offices in the city center reached 14.4% (up 0.4% from the previous quarter). Meanwhile, the vacancy rate for Class A offices in areas outside the city center remained at 9.4%.
Regarding rental prices, according to CBRE Vietnam, in 2023, office rental prices in Ho Chi Minh City for both Grade A and Grade B remained relatively stable with little fluctuation, despite many new projects entering the market. Specifically, the rental price for Grade A offices was at 46 USD/m2/month and Grade B at 25.8 USD/m2/month.
Meanwhile, JLL Vietnam reported that Class A office rents in central Ho Chi Minh City fell by 2.8% year-over-year, while rents for offices outside the city center fell by 1.5% year-over-year.
Commenting on tenants in Ho Chi Minh City, CBRE stated that tenants tend to research rental spaces quite early and are willing to sign lease agreements before buildings officially become operational in order to secure better rental rates. The trend of preferring high-quality office space among tenants is growing, especially among multinational corporations. Amid an economic context that still faces many difficulties, abundant supply has enabled tenants to negotiate good rental rates for higher-quality spaces.
Prices will be adjusted flexibly
Assessing the prospects of the office market in 2024, Ms. Pham Ngoc Thien Thanh, Head of Research and Consulting at CBRE in Ho Chi Minh City, stated that while the economy shows no clear signs of recovery and supply remains abundant, overall office rental rates will tend to adjust flexibly through lease terms that are more favorable to tenants. It is projected that in 2024, the HCMC office market will continue to welcome approximately 53,000 square meters of new supply, all located in non-central areas.
“Only a few quality projects in central locations with convenient transportation and standout features such as green certifications and diverse building amenities will be able to see a slight price increase next year. At the time, in future lease transactions, negotiating contract terms related to green and sustainable factors will gradually become more common,” Ms. Thanh analyzed.
It is expected that in 2024, Ho Chi Minh City's office market will continue to receive a new supply of approximately 53,000 m2, all of which are located in non-central areas.
Providing her personal assessment of the Grade A office segment in Ho Chi Minh City, Ms. Trang Le, Senior Director of Consulting and Research at JLL Vietnam, stated that the next 12 months will witness the addition of another 40,000 square meters of net leasable area in non-central areas by the end of 2024. Demand for high-quality space meeting international Grade A standards, particularly projects with green certifications, is expected to continue rising as premium tenants seek to expand and upgrade their office spaces with specific requirements.
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Source: VNeconomy
