HCMC’s office market in Q4.2019 has impressive metrics.
According to Mr. Troy Griffiths, Deputy Managing Director, Savills Vietnam, “96% occupancy, with a gross rent increase of 3% Year-on-Year to US$32/m²/month make it one of the best performing and strongest office markets in the world at the moment”.
New supply from Grade B with 2 new buildings, and Grade C with 8 new buildings, added over 101,000 m² this quarter. At the end of 2019, total supply reached 2.1 million m², increasing 8% Quarter-on-Quarter and 13% Year-on-Year.
With limited stock, Grade A had the best performance, as rents increased 9% to US$61/m2/month and occupancy improved by 3ppts.
According to Savills Vietnam, in 2020, there is a fair new amount of supply coming online, with more than 270,000 m², mostly from Grade B & Grade C buildings in non-CBD areas. By 2022, approximately 357,000 m² will enter; 76% will launch in 2020.
Tenants have a variety of leasing options in Grade B and C buildings, with the average deal size from 600 to 1,000 m². Benefiting from the fast growing macro economy, there has been strong demand from local Small and Medium Enterprises (SME’s).
The strong performance is expected to continue, with decentralisation to affordable options. However, prospective tenants should do their due diligence, and carefully review and vet project timelines, since many commercial projects have encountered administrative delays.
Tu Thi Hong An, Associate Director, Head of Commercial Leasing, Savills Vietnam commented about the demand trend in 2020 and said, “Tenants seeking new space or merely looking for business expansion, as well as companies who cannot afford the higher prices should consider options in non-CBD areas, where there is more than 200,000 m² available. For example, Opal Saigon Pearl in Binh Thanh District, The Orchard Parkview in Phu Nhuan District and Phu My Hung Tower in District 7. The rapid growth of SME’s and the Finance, Insurance, Real Estate sectors (F.I.R.E) and ICT will push decentralization.”
Based upon this outlook, companies that are located in HCMC’s district 1 area should look to the surrounding areas, such as districts 2, 3, 4, 5 and 7 if they are contemplating expansion or office moves. New developments in the non-CBD areas that are coming online in 2020 may offer new tenants significant long-term cost savings and flexibility that they are unable to achieve in district 1 complexes.