Office supply is increasing, but occupancy rates remain low.

Abundant supply

For many years, the office rental market in Ho Chi Minh City has been considered one of the most attractive segments for clients and investors, generating significant profits.

According to a CBRE report, in 2023, Ho Chi Minh City saw a significant increase in new supply in the mid-range and high-end office segments. The first two Grade A office buildings were located in Thu Thiem, including The Hallmark (54,500m2) and The Mett (30,333m2).

The supply of office space in Ho Chi Minh City has continued to increase over the past few years.

Thanks to this new supply, the total office space in Ho Chi Minh City has reached approximately 1.6 million square meters of leasable area.

According to the latest report from Dat Xanh Services (a market research firm), the supply of office space in 2023 (considering only the area of ​​space actually available for use) in Hanoi is approximately 2,100,000 m2 and in Ho Chi Minh City approximately 2,600,000 m2, representing an increase of approximately 1% and 2% respectively compared to the same period in 2022.

In terms of office space occupancy rates, Ho Chi Minh City reached 91%, a decrease of nearly 2% compared to the same period in 2022. This figure is considered very good given the overall challenging market conditions.

Many businesses have built office buildings around the center of District 1.

Office rental prices have remained relatively stable, with the average rental price in Ho Chi Minh City at nearly US$32.5/m2 – representing an average annual increase of 3% - 5%.

According to observations, the commercial office market in Ho Chi Minh City is currently witnessing the participation of large organizations such as banks and insurance companies in the commercial office segment.

Instead of simply renting office space as before, these businesses have now shifted to simultaneously utilizing office and commercial spaces in prime locations nationwide.

Supply and demand are out of sync.

Since the Covid-19 pandemic, there has been a continuous wave of office space being vacated in buildings in central districts like District 1, District 3, and suburban districts such as Go Vap, Phu Nhuan, and District 2. Many buildings on major roads like Nguyen Thi Minh Khai, Truong Dinh, and Dien Bien Phu still have vacant spaces and are constantly advertising for tenants.

According to the Vietnam Association of Real Estate Brokers (VARS), in 2023 the office rental segment in major cities like Ho Chi Minh City faced the risk of oversupply due to the addition of many new, high-quality sources of supply while older office buildings did not proactively renovate or upgrade.

There is currently a large amount of office space available for rent; however, according to experts, the occupancy rate is not yet high.

Meanwhile, there has been a surge in businesses returning leased premises, especially towards the end of the year, due to financial difficulties.

“After the pandemic, a time of significant economic and social changes has occurred… some businesses have altered their business strategies, streamlined their operations, or sought to rent commercial properties instead of offices in the city center to reduce costs… this has significantly impacted the office segment. However, this is a general trend, and businesses will adapt to different situations,” commented Mr. Nguyen Hong Hai, Chairman of VNO Group.

These are compact and pre-arranged office spaces designed to attract tenants.

Speaking to Nguoi Dua Tin , Ms. Trinh Thi Kim Lien, Business Director of Dat Xanh Services, said: “The office rental segment shows a clear differentiation between older office buildings and new office supply. In particular, Grade A and B+ offices in the central core areas of major cities like Ho Chi Minh City are always in short supply, while demand from international clients and FDI businesses is very high.”

Furthermore, occupancy rates are uneven across segments: some properties require a waiting list for rental, while others remain vacant for extended periods.

According to Ms. Lien, some banks and large businesses are now beginning to leverage their own resources by constructing large office buildings and leasing out unused floors and spaces. This is one of the significant sources of supply that has emerged recently.

Experts predict that if the rate of office space vacations continues to rise, it is likely that the number of businesses renting and rental prices will decrease, especially in older office buildings. This will further exacerbate the supply-demand imbalance.

Given the current economic situation, experts predict that the office market will continue to face many challenges. Businesses need to prioritize appropriate allocation and reduce the pressure of excess office space.

Source: https://www.nguoiduatin.vn/tphcm-nguon-cung-van-phong-tang-ti-le-lap-day-thap-a644727.html