Ho Chi Minh City office market beats records

Ho Chi Minh City has seen rapid expansion of co-working spaces over the last two years, with a sharp increase of over 90 per cent per annum to reach over 37,000 square meters as of the reviewed period (Illustrative photo: baoxaydung.com.vn)

Savills Vietnam said in a recent report that vacancies in the Ho Chi Minh City (HCMC) market are continuously declining. This trend can especially be seen in the central business district (CBD) area, with all recent entries rapidly absorbed.

Rent remained robust with another quarterly hike of 2 per cent, continuing its five-year momentum into the first quarter of 2019. Rents for top-tier grade offices (Grade A) continued to lead, up 2 per cent on quarter, representing accumulative growth of 13 per cent over the past five successive quarters.

Leveraging high demand but limited available stock, landlords have continued to raise rent and hold firm in negotiations, whilst tenants have had to either accept rental hikes or consider alternatives, such as locations outside of the CBD or flexible working spaces.

With good macro fundamentals, the HCMC office market is expected to maintain its momentum during 2019. Up to 11 projects with 206,000 square meters are scheduled to come online this year, serving the demand for high quality space. Given this context, rent will increase in the prime segment and for secondary buildings, Savills forecast.

According to Tu Thi Hong An, associate director for commercial leasing at Savills HCMC, the municipal office market has matured with multiple commercial objectives in play. Tenants continue to scour the market to balance expansion pressure with reasonable cost. With uncertainty in the delivery of pipeline, future decentralized opportunities come into play.

Co-working Boom

The function of an office is changing alongside the development of new technology and working styles. With remote work becoming more common, co-working spaces are booming globally.

HCMC has seen rapid expansion of co-working spaces over the last two years, with a sharp increase of over 90 per cent per annum to reach over 37,000 square meters as of the reviewed period. The majority of space (20,000 square meters) is concentrated within the CBD, representing a 56 per cent share.

WeWork, Up, Dreamplex, Regus, Compass, and Kloud are anchor tenants in many buildings. The industry is expected to steadily expand due to the demand from both domestic and global firms who are looking to minimize costs, increase flexibility, and establish a foothold in the market.

The last few years have seen a significant rise in the value of achieving office ‘green standard’ certification. This trend can be seen at Maple Tree Business Centre, Deutches Haus, and Etown Central which all have gained LEED certificates.

Green and sustainable properties are more cost-effective, comfortable, and designed with respect to the environment. Savills expects green certification to become more widely used in new properties.

During the first quarter of 2019, an estimated 28 per cent of the future stock currently under construction in HCMC reached LEED certificates.