High-end Office Rental Cost is Rising

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Currently, the office rental cost, especially high-class offices, is increasing over time, the following are reports on the above.

High-class Office Rental Cost in Q1

In the first quarter, high-end (grade A) office space recorded an increase in rents of 3.8-5.3%, recovering positively after a period of decline due to Covid-19.

In the first quarter of the year, the rent for Grade A office space was $44.9 per square meter per month, up 5.1% QoQ and 5.3% YoY. Grade B office rents are $25.9 per square meter per month, up 1.7% QoQ and 3.1% YoY.

Also recording an upward trend, the average rent of Grade A office buildings in the first three months of this year increased by 3.8%. The high-end office segment in Ho Chi Minh City had many improvements in the first quarter of the year and especially attracted customers from the technology industry.

After the subsidy period (discounts to support the epidemic season), Grade A buildings, belonging to the high-end office segment, had a slight increase in rental prices compared to the same period last year. In the first three months of the year, high-end office rents reached 1.4 million VND per square meter per month, a slight increase of 1% over the same period last year.

You can know more about office rental costs here: 9 Types of Office Rental Costs Customers Need to Know

The demand for office space in the information technology industry recovers strongly in office rental cost

Not only increasing rents, but the office market also recorded a strong recovery in new rental demand in the information technology industry.

In the first quarter alone, the total net absorptive (leaseable) office space reached 17,000 m2, equivalent to 32% compared to the whole of last year. Tenants who tend to expand offices in the quarter are mainly from post-pandemic growth industries such as information technology and logistics. These two industries account for nearly 60% of the total transaction area, promising to continue to lead the demand for the office market in the next two years.

Office relocation transactions accounted for the most significant proportion with 55% of total transactions, the rests were extension and expansion transactions (25% and 20% respectively). There have been large leasing transactions (over 1,000 m2) in several high-quality buildings in both the central area and other areas such as Thu Thiem, District 7, 10.

The demand for office buildings that meet green and sustainable standards will continue to increase in Vietnam, especially in the post-pandemic period. Looking at specific industries, commerce, real estate, electronics manufacturing, information technology, and communication are the key sectors driving office rental cost demand in the coming years due to abundant FDI.

There are about 16,500 m2 of office space for lease in the Ho Chi Minh City market, 1,500 m2 more than the consumption in the fourth quarter of 2021. This increase can partly be attributed to HCMC’s rapid economic recovery after the pandemic. The city’s GDP growth in the first quarter came in at 1.9%, a positive growth after the previous two negative quarters. In the first quarter of 2022, the number of newly established companies in Ho Chi Minh City was 8,500, an increase of 35% over the same period last year, and Ho Chi Minh City added 10,800 new jobs.

The average area of a transaction in the first quarter of 2022 is about 250 m2. Information and communication technology enterprises accounted for 54% of the total new consumption area, followed by distribution group enterprises with 17%, finance, banking, and insurance enterprises with 14%.

Office demand from IT tenants is expected to continue to increase in the coming time. The revenue of this industry during a difficult year due to the outbreak of Covid-19 (2021) still increased by 9% compared to 2020. By the end of 2025, revenue growth is expected to be 15% per year and the total number of public enterprises with information technology will increase by 12% per year and reach 100,000 enterprises operating nationwide.

Office rental cost demand from the information technology industry and related fields, such as electronics manufacturing, has shown signs of strong growth. With the demand for information technology companies often renting large floor space of over 1,000 m2 while the vacant office space in the central area is increasingly limited, these businesses tend to move to offices in the central area. outside the center, especially in new urban areas such as districts 2, 7.

According to the forecast of the Center for Forecasting of Manpower Demand and Labor Market Information in Ho Chi Minh City, there will be about 65,500 to 72,500 new jobs in the second quarter of 2022 and 310,000 new jobs for the whole year. Some industries have high labor demand and have great office potential, such as distribution, real estate, and information technology. With a general estimate that each office worker needs 8 m2 to work, the office market in HCMC will need 140,000 m2 of office space to accommodate the number of new jobs in 2022.

You can know more about office rental costs here: How to Negotiate the Most Reasonable Price and Cost of Office Rental

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