HCMC office building market sees partial recovery

Grade A office rents in Ho Chi Minh City continued to slip in the third quarter but that of grades B and C increased for the first time since the end of 2009, real-estate consultancy CB Richard Ellis reported.

While average rent for grade A offices fell to US$36.70 per square meter per month from $37.51 in the second quarter, it rose from $19.3 to $20 for grade B offices.

The total area leased in the 3rd quarter was 62,000 sq. m, taking the total for the year to 194,000 sq. m, or higher than in the whole of 2009 when the number was around 154,500 sq. m.

HCMC’s economic recovery, which remains on track, is persuading companies to move to large office buildings.

Banks, schools, and service providers are among the main customers for grades B or C in the downtown area.

Although eight new grade C and one grade B buildings opened in the 3rd quarter with more than 63,000 sq. m of space, the rate is still climbing. On the other hand, no new grade A building came into the market but the rental is still falling.

Another reason for the declining demand and rent for grade A offices is the competition from some tenants who buy space in the buildings at preferential prices and lease it out at 15-35 percent lower than the building owners.

Though the economic recovery will mean higher demand for office space in the coming future, rates will decrease as a result of huge supply coming into the market.

In the final quarter of this year alone, 100,000 sq. m will be available, including at the Bitexco Financial Tower which will have 37,000 sq. m of grade A space.

In the next three years, 1.2 million sq. m of new office space for lease will be available.

Old buildings will face tough competition and, though many are planning to upgrade, will find it hard to maintain current rentals.

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Landlords fight for new tenants

HCM CITY — Landlords in HCM City will vie with each other during the third quarter in offering better leasing deals including rent and amenities, according to the latest market review published by real estate firm CBRE.

The firm received 28 per cent more enquiries in the third quarter than the second, but more than 43 per cent of these were for spaces 150 sq.m and smaller, the review says.

The company estimates that around 1.2 million square meters of office space will be put in use over the next three years in the city.

Project owners will face a challenge from long-term tenants of large areas who plan to re-rent a part of their space at prices between 15-35 per cent lower than the standard ones, CBRS associate director of research and consulting Rudolf Hever, said at a press conference on Monday.

He also said (2,000-5,000sq.m) grade C buildings in prime locations would continue to be popular because their value and long-term lease would help tenants have greater control over their investment.

There were no new grade A office buildings on offer during the third quarter, but rents for the segement reduced lightly to a monthly average of US$36.7 per sq.m, which Hever said was due to higher demand for grade B and C spaces.

One grade B building and eight new grade C buildings came on line in the third quarter, providing a total of 63,180sq.m. — VNS

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Office rent continues downward trend

HCMC – The average office rent in HCMC continued its downtrend as supply increased further in the third quarter of this year, posing more pressure on rent and occupancy benefiting tenants, according to Savills Vietnam.

The market research company released its quarterly report last Thursday, noting that office rent dropped some 3% compared to the previous quarter since property owners were anxious about the risk of oversupply.

The market witnessed asking rents in Grade A office segment dropped 3% to US$57, Grade B was down 2% to US$33 and Grade C also fell 2% to US$22 per square meter per month. However, average occupancy remained stable at 85% thanks to the arrival of new tenants and a shift from private houses to professionally-managed buildings.

Tran Nhu Trung, associate director of research and consulting for Savills Vietnam, said oversupply and competition would continue to drag down rents and occupancy across all the three grades. The competitive rental market, however, will give more chances to tenants in selecting quality serviced buildings.

Savills, however, projected that demand for office space, in the mid and long-term, would continue to increase given the expected high growth of the city’s economy. Grade A office buildings are waiting for a new wave of foreign direct investment inflow, while Grade B and Grade C buildings depend much on the health of domestic investment.

The city’s office market has 154 office buildings at all grades, offering nearly a million square meters of office spaces, with Grade B office more dominant with a 50% market share.

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