Starting from a company specializing in leasing serviced apartments in Ho Chi Minh City, TSA Land is now forced to change direction to the office segment. Mr. Bui Minh Thuc, business leader, said that this is the safest real estate rental model today.
"While serviced apartments face difficulties because people tighten their spending and business space is sluggish, office buildings for lease still have a high occupancy rate. As for our office portfolio, The occupancy rate is up to 80%", said Mr. Thuc.
According to data from Knight Frank Vietnam, office occupancy rate in HCMC in the first quarter of the year returned to pre-pandemic levels with rents steadily increasing. Currently, the average rent for Grade A offices is at 55.31 USD/m2, the highest in the central districts at 62.54 USD/m2, while in the South of the city it is 48% lower, about 32. 78 USD/m2.
Meanwhile, Grade B office space has an average rent across the city of 34.03 USD/m2, of which 43.37 USD/m2 in the central districts and about 33.84 USD/m2 in the surrounding areas. .
Mr. Alex Crane, Managing Director of Knight Frank Vietnam, attributed the increase in rents due to scarcity in the market, with the vacancy rate of Grade A and B offices being only 10% across the city.
Assessing the growth rate of the market in recent years, Ms. Vo Thi Khanh Trang, deputy director of the Savills Research Department in Ho Chi Minh City, also said that supply maintained its upward momentum but slowed down.
The reason is that in the period of 2020-2021, the Covid-19 pandemic has significantly impacted many areas, causing a decrease in the demand for office rental. Tenants tend to reduce office space or move to buildings with more affordable rents. New tenants are also delaying plans to open a company or develop a project.
Masterise Homes has just broken ground for The Sun Tower, which is expected to supply 87,000 m2 of Grade A office space to the market in 2023. Photo: Masterise Homes.
The supply shortage is forecasted by experts to continue until 2023, when the market welcomes about 87,480 m2 of Grade A office space.
In the next two years, Grade B office space will also be added with about 136,137 m2 of leasable area. From 2024 onwards, the city is expected to have an additional 388,350 m2 of Grade A and B office space currently in the planning stage, but it is likely to be ready only after 2024.
Looking at future supply, in 2025 is expected to add about 351,480 m2 of Grade A office space, bringing the total area of high-class office space for lease to nearly 700,000 m2, an increase of about 50% of the market size compared to present.
In the meantime, the market welcomes new supply when Masterise Homes breaks ground for The Sun Tower building located in the branded real estate complex Grand Marina (District 1, Ho Chi Minh City).
With a total floor area of over 106,000 m2 of high-class offices and commercial centers, including 87,000 m2 of Grade A office space, this will be one of the largest commercial and office buildings in the city. .HCM when completed in 2023.
Occupancy rate will be maintained at above 90%, rent will increase by 15-20% by the end of 2023.
Mr. Alex Crane, Managing Director of Knight Frank Vietnam
According to Mr. Alex Crane, although the rent of Grade A office space in the first quarter of 2022 only increased by 0.2% compared to last year and 0.56% compared to the previous quarter, investors can hand over office space. High-end rental in the next 18-24 months will definitely achieve high profitability.
"Occupancy rate will remain above 90% and we expect rents to increase by 15-20% by the end of 2023," he said.
Ms. Vo Thi Khanh Trang also acknowledged that with Vietnam's open-door policy and pandemic control capacity, businesses are seeing the attractive potentials of the market and quickly taking positive actions in their minds. this year.
"Future buildings have restarted. The economy has recorded many positive signs, FDI inflows into Ho Chi Minh City continue to increase, showing that foreign businesses still consider Vietnam an attractive investment destination. Although we have not yet seen a clear recovery of the office market, we expect to see a step-by-step improvement in the near future," said Ms. Vo Thi Khanh Trang.
According to an expert at Savills, this year, the Grade A and B office segments will still be sought after due to their good quality and prime location, attracting foreign tenants with strict criteria. more slot. Areas such as districts 1, 2, 3 will continue to be the top locations selected.
Although many Grade A office owners have goodwill to support tenants, not all businesses have the financial capacity to pay that price. Therefore, many businesses have reduced the leased area or switched to Grade B offices with good locations.
Ms. Vo Thi Khanh Trang assessed that tenants are also changing to adapt to the market, ensuring an appropriate rental budget while still having a reasonable office space.
In the context of scarcity of land fund in the central area of Ho Chi Minh City, new projects in Phu Nhuan, Binh Thanh, District 7 will be alternative investment destinations in the period 2022-2023.
According to data from Savills Vietnam, the trend of moving out of the center has been recorded since 2021, when the new supply outside the CBD accounted for 84% of the total new supply, up 9% year on year and accounting for 48%. total market supply.
Mr. Leo Nguyen, Director of Strategy and Tenant Solutions at Knight Frank also suggested that tenants looking for a more economical option could consider the emerging commercial areas in the South of HCMC. and Thu Duc City.
"The average rent for Grade A office space in the South area is about 32.78 USD/m2, grade B is 21.60 USD/m2. On the other hand, Thu Duc city is changing strongly and will create a price revolution. lease in the future when Thu Thiem area is fully developed. Currently, the rent for Grade B office here is at 30.08 USD/m2, "said Mr. Leo Nguyen.
The growth potential of the office leasing market is currently appreciated through optimistic indicators of economic development and FDI inflows in the future.
The Center for Human Resource Forecasting and Labor Market Information in Ho Chi Minh City estimates that if the Covid-19 epidemic is well controlled, the labor demand in the city this year will be 310,000 jobs, mainly concentrated. in commerce, real estate and electronics manufacturing.
These industries, along with the information and communication technology industry, which are accounting for the majority of new and additional FDI in 2021, are likely to become the key industries generating demand for office space.
