The office rental segment is booming.

Grade A office projects are the most popular choice, attracting many new clients.

According to market research data, the office rental market showed signs of renewed activity in late 2023. A significant amount of new space was added after a period of decline due to numerous projects being halted because of the Covid-19 pandemic. Now, with commercial housing projects restarting, the supply of office space for rent is recovering; rental prices remain relatively stable, although slightly lower than in 2022, but maintain a high occupancy rate.

In Ho Chi Minh City, the supply of office space for rent has increased compared to the same period last year. Grade A office projects are the most popular, attracting many new clients, especially foreign companies, and a large proportion of rental transactions involve office relocations. Currently, most tenants prefer the inner city, where there are new, high-quality office projects with flexible rental prices to suit their needs.

Recently, the opening of two new office buildings in the Thu Thiem area (Thu Duc City), with a total leasable area of approximately 85,000 square meters, has contributed to a more vibrant office rental market. According to CBRE Vietnam, both new office buildings in the Thu Thiem area are Grade A, conveniently located just 5 minutes from the city center, have green building certifications, and have achieved relatively positive occupancy rates before officially becoming operational.

This indicates that demand for new, high-standard office buildings in prime locations remains strong, particularly among multinational corporations. Thanks to this new supply, the total leasable office space in Ho Chi Minh City has reached approximately 1.6 million square meters. Notably, demand in niche markets for high-quality, internationally-standard Grade A office space is expected to continue its upward trend, especially for green building projects, as high-end tenants are seeking to expand and upgrade their office space with specific requirements.

According to real estate experts, in addition to the increase in new supply, office rental prices from the beginning of 2023 to the present have been relatively stable. Some properties even saw a slight decrease towards the end of 2023, making this a suitable time for businesses and investors to lease new space or expand their office area.

Ms. Tu Thi Hong An, Director of the Commercial Services Real Estate Department at Savills Vietnam, stated that in recent times, the supply of new office space for rent has been severely limited due to the aftermath of the Covid-19 pandemic, and businesses have faced difficulties in raising investment capital. Towards the end of 2023, the supply of new space was added slowly, but this is considered a positive sign indicating the recovery of this segment.

In Ho Chi Minh City, the average rental price for Grade A office space in the central District 1 is 1,320,000 VND/m2/month, while in the central District 2 (formerly) it reaches 1,080,000 VND/m2/month; the rental price for Grade B office space in the central District 1 is 720,000 VND/m2/month... Along with this, the occupancy rate of office space for rent is also relatively impressive. In Ho Chi Minh City, the average occupancy rate across the entire market remains at 92%.

Ms. Pham Ngoc Thien Thanh, Deputy Director of Research and Consulting at CBRE Vietnam, believes that the Ho Chi Minh City office rental market is expected to become more vibrant soon, given that the market has been waiting for truly high-quality supply for a relatively long time, especially in the Grade A office segment. Currently, in addition to pursuing high-quality standards, investors are also paying close attention to green criteria, ensuring a high quality of life for office workers. "This is because it is a crucial factor in attracting and retaining large tenants and multinational corporations. This means that Grade A buildings that have been in use for a long time need urgent plans to renovate and upgrade to ensure competitiveness," Ms. Thanh analyzed.

Meanwhile, Ms. Trang Le - Senior Director of Consulting and Research at JLL Vietnam, commented that in early 2024, the office rental market continued to witness intense competition from a wave of new projects. In the context of a challenging economy , despite being a leading destination for Grade A tenants nationwide, the Ho Chi Minh City office market is expected to return to a balance in negotiations between landlords and tenants.

Despite a positive recovery in late 2023, many experts believe that the office rental real estate segment is still facing challenges related to legal issues. In addition, the rising cost of building materials and equipment for office construction, while developers must maintain stable, stagnant, or slightly reduced rental prices, is also considered a challenge and difficulty for businesses in investing capital.

However, even though economic difficulties have not yet passed, foreign businesses still have high expectations for entering the Vietnamese market in the near future, so the office rental segment still has significant growth potential. Investors are also paying more attention to changing designs and improving service quality in order to retain and attract new tenants.

Source