Market Office for lease 2020 & Outlook 2021
In 2020, the market office for lease supply continues to increase while demand is limited due to the impact of Covid-19, vacancy rate increases & occupancy rate decreases slightly. Enterprises tend to change the flexible working model and consider moving offices from the center to the neighboring districts. However, Vietnam is considered as one of the least affected countries and prospects for economic and infrastructure development.
Office for lease Supply: Supply in 2020 increases compared to last year.
In Q4 2020, there were no new Grade A buildings in the HCMC office for rent market. However in 2020, the market burns
received 1 additional Grade A and 7 Grade B projects, providing about 139,000 m2 of net leasable area, stock of more than 2.3 million m2, up 7% QoQ and 12% YoY.
Office for lease Demand: Occupancy rate decreased slightly
Tenants struggling during the Covid-19 period mostly chose to reduce their occupancy or even switch to lower-segment buildings. Vacancy rates increased as tenants paid for floors and new projects with low occupancy, tenants moving to the lower segment or townhouses accounted for more than 50% of outbound transactions during the year.
Tenants who are financially rich, unaffected by the pandemic are moving their workplace to Grade A towers, although the number of transactions in Q4 / 2020 is much lower than the previous quarter. The supply of Grade A buildings remains stable. Despite a slight decrease compared to the same period last year, the occupancy rate in Q4 still reached over 90%.
Tendency: Tenants prefer flexible space
Due to the influence of Covid-19, enterprises cut down on the number of employees, business uncertainty caused firms to want to hire on short-term and more flexible contracts.
Some businesses will transform telework and reduce staff density in the workplace to secure season gap and reduce rented space, coworking space, or serviced private office for rent are an alternative that many businesses are considering.
In addition, the trend of moving to neighboring districts with lower rents is also sought by businesses to reduce costs.
Outlook: The market outlook for 2021 is limited, but potentials from economic and infrastructure developments
The market will welcome five new projects by 2021, which will add more than 76,000 square meters of space to the market. These projects are D ‘Saint Raffles, Geleximco, Empire 88, Cobi Tower 2, and The Graces. Other notable projects thereafter include V Plaza Towers which will add 66,000 square meters by 2023 and 35,000 square meters from The Spirit of Saigon Building in 2024.
By 2023, the office for rent market is expected to record an additional 325,000 square meters of floor space, of which supply in 2021 accounts for over 60 percent. The vacancy rate is estimated to continue to increase in 2021 as a large amount of new supply enters amid limited demand. Although the market outlook is limited, Vietnam is among the least affected countries.
According to the forecasts of FocusEconomics, the average annual GDP growth of Vietnam will reach 6.9% / year in the next three years, confidence and investor position will continue to be strengthened.
Many Foreign Trade Agreements including EVFTA, UKVFTA, and RCEP that will begin or continue in 2021 is expected to contribute to increased demand for the office for rent market. In terms of infrastructure, the introduction of Thu Duc City will most likely boost the value of the real estate market in the East of HCMC. Along with that, the Ben Thanh – Suoi Tien Metro line project makes an important contribution to connecting Thu Duc city with the central area, increasing the value of works along Hanoi Highway.
For Foreign companies that want to start or expand businesses and look for an office in Vietnam:
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