Firms hit by economic woes, cut office space

The signs are becoming increasingly clearer that tenants are moving out of office buildings altogether or renting smaller places like they used to during the peak of the Covid pandemic.

The director of a technology company in District 1 said in late March he reduced the office area by 60% and looked for a co-tenant to share the space and the rent.

With business slowing down in the first quarter, the company has had to ask the landlord to delay rent collection several times, he said. "We have cut the number of employees to less than 10 and the office area to reduce labor costs and overheads."

Vinh, head of sales at a real estate brokerage company, said his company has had to close three branches to cut costs amid the slumped property market. "Closing the offices has helped us reduce costs by hundreds of millions of dong a month."

Hoa, director of a major real estate trading floor, said his firm laid off 60% of its staff in the last quarter of last year, shut two branches and reduced its office size in the first quarter. "I have had to close the offices to cut costs. When the economy improves, I will consider renting them again."

According to real estate consultancy CBRE Vietnam, there were few fresh leases in the first quarter, while many tenants moved out or reduced leased space, leading to an increase of 3,500 square meters in vacant Grade A space.

Thanh Pham, head of research and consulting at CBRE, said many of the tenants who moved out are property developers in financial trouble.

Another property consultancy, Cushman & Wakefield Vietnam, said occupancy rates in grade A and B office buildings decreased by 1.6 and 2.1 percentage points in the first quarter.

According to Trang Bui, CEO of Cushman & Wakefield Vietnam, office tenants face a lot of challenges, including weak domestic demand, reduced orders for some processing and manufacturing industries, the risk of disruption to the global supply chain, high logistics costs, fluctuations in energy costs and interest rates, and difficulties in getting bank loans.

Things would continue to remain difficult in the short term, she predicted.