Office for rent segment is bustling

The most selected Grade A office projects attract many new customers

According to survey data from a market research company, by the end of 2023, the office rental segment has shown signs of becoming more active again. New supply has been supplemented with a large amount of space after a period of decline due to a series of projects being forced to stop due to the Covid-19 pandemic. Up to now, when commercial housing projects have restarted, the supply of office real estate for rent has begun to recover; rental prices remain relatively stable, although slightly lower than in 2022, but the occupancy rate remains high.

In Ho Chi Minh City, the supply of office space for lease has increased compared to the same period last year. In particular, Class A office projects are the most chosen, attracting many new customers, especially foreign companies and accounting for the majority of leasing transactions is office relocation. Currently, most tenants prefer the inner city, where there are new, high-quality office space for lease projects, flexible rental prices, suitable for demand.

Recently, the appearance of 2 new office buildings in Thu Thiem area (Thu Duc City), with a total leasable area of about 85,000m2, has contributed to making the office rental market more vibrant. According to CBRE Vietnam, both new office buildings in Thu Thiem area are class A, conveniently located with only 5 minutes to the central area, have green certificates and achieved a relatively positive rental rate before officially going into operation.

This is a sign that the demand for new office buildings with high standards in convenient locations is still receiving attention from businesses, especially multinational companies. Thanks to this new supply, the total office area in Ho Chi Minh City has reached approximately 1.6 million m2 of leasable area. Notably, the demand in the niche market with high-quality premises according to international Grade A standards is expected to continue to increase, especially for green projects when high-end tenants are in need of expanding and upgrading office space with special requirements.

According to real estate experts, in addition to the increase in new supply, office real estate rental prices from the beginning of 2023 to now are assessed to be relatively stable, in which, some products recorded a slight decrease in the end of 2023, so businesses and investors consider this to be a reasonable time to rent new or expand office space.

Ms. Tu Thi Hong An - Director of Savills Vietnam Commercial Services Real Estate Department said that recently, the supply of new office space for lease has been very limited due to the post-Covid-19 pandemic, making it difficult for businesses to mobilize investment capital. At the end of 2023, new supply was slowly added, but this is considered a positive signal showing the recovery of this segment.

In Ho Chi Minh City, the average rental price of Grade A offices in the center of District 1 is 1,320,000 VND/m2/month, in the center of District 2 (old) is 1,080,000 VND/m2/month; the rental price of Grade B offices in the center of District 1 is 720,000 VND/m2/month... Along with that, the occupancy rate of office space for rent is also quite impressive. In Ho Chi Minh City, the average occupancy rate of the whole market remains at 92%.

Ms. Pham Ngoc Thien Thanh - Deputy Director of Research and Consulting Department of CBRE Vietnam said that the office leasing market in Ho Chi Minh City is expected to become more vibrant soon in the context that the market has been waiting for truly quality supplies for a relatively long time, especially in the Class A office segment. Currently, in addition to pursuing high quality standards, investors also pay great attention to green criteria, ensuring the quality of life for office workers. "The reason is that this is the prerequisite factor to attract and retain large tenants and multinational corporations. This means that Class A buildings that have been in use for a long time need urgent plans, renovations and upgrades to ensure competitiveness" - Ms. Thanh analyzed.

Ms. Trang Le - Senior Director of Consulting and Research, JLL Vietnam, commented that in the early stages of 2024, the office leasing market will continue to witness great competition from a wave of newly launched projects. In the context of the economy facing many challenges, despite being the locality attracting the leading Class A tenants in the country, the Ho Chi Minh City office market is expected to return to a balance in the negotiation balance between landlords and tenants.

Although it was recorded to have a positive recovery in late 2023, many experts believe that the office real estate segment for lease is still facing challenges related to legal issues. In addition, with the price of materials and office construction equipment increasing, while the rental price must remain stable, flat or slightly decreased by investors, it is also considered a challenge and difficulty in investing capital for businesses.

However, although the economic difficulties have not yet passed, foreign enterprises still have high expectations for entering the Vietnamese market in the near future, so the office rental segment still has a lot of potential for development. The trend of changing design and improving service quality is also receiving more attention from investors in order to retain and attract new tenants.

Source