HCMC affordable office leasing market shows signs of recovery

By Vu Le   March 31, 2022 | 08:30 pm PT
Declining vacancy rates and rising rentals indicate demand for office space in the US$15-20 per square meter segment is recovering from its Covid-19 slump.

VNO Development and Investment Corporation, a company that leases out 14 office buildings with a total area of 50,000 sq.m, said the vacancy rate has shrunk by nearly a fourth since October to 20 percent.

Since February it has added three more buildings to its portfolio accounting for 30 percent of the floor space it has, to meet the growing demand for affordable office space.

Office space outside downtown -- in districts like Tan Phu, Phu Nhuan and Binh Thanh -- costing VND350,000-700,000 ($15-30) per square meter per month also reported the lowest vacancy rate in the last nine months.

Chairman of VNO, Nguyen Hong Hai, said offices of less than 300 sq.m account for 90 percent of the market.

Demand from small and medium enterprises is recovering, he added.

Ho Chi Minh City’s central business district. Photo by VnExpress/Quynh Tran

Ho Chi Minh City’s central business district. Photo by VnExpress/Quynh Tran

CEO of office leasing firm Sabay Home, Nguyen Huu Thien, said the market is seeing positive signs from some sectors like IT, financial services, insurance, logistics, and pharmaceuticals.

Around 50 percent of potential customers are ready to survey and negotiate to lease offices while some are hesitant due to the economic situation, the pandemic and high inflation risk, he added.

But he expected the affordable segment reach to fully recover in the next three to six months.

Vo Thi Khanh Trang, head of Savills Research, said new supply is in non-central business district areas due to the competitive prices.

The fill rate in these areas would continue to rise during the rest of 2022 though prices would go sideways since new projects usually offer lower rents, she said.

She said there is a trend of companies trying to cut rental costs by shifting to grade B and C offices or smaller ones.

Some 84 percent of new supply is in non-CBD areas.

Trang is positive about the overall office leasing market because of Vietnam’s key economic indices and pandemic resilience.

The Center for Forecasting Manpower Needs and Labor Market Information HCMC said the city would need 310,000 workers this year, given the pandemic is well under control.

Commerce, real estate, electronics manufacturing, IT, and communications are likely to be the key sectors from where demand for office space would come, it added.

Total supply was 2.4 million sq.m in the final quarter of 2021, up 5 percent year-on-year.

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