Market Office for lease in Q3/2020 – Ho Chi Minh
In Q3 / 2020, there was no new supply in Ho Chi Minh market office for lease, the supply continued to increase, putting pressure on the whole market. The negative impact of Covid-19 and economic instability weighed heavily on the need to rent offices in HCMC. Due to the constant supply, most landlords seem to be confident with the current tight market and limited future supply, rents remain stable but there are short-term promotions to Attract and support tenants this time.
Supply: Q3/2020 The market Office for lease is still scarce in Ho Chi Minh
In Q3 / 2020, there was no new supply, supply growth continued to put pressure on the whole market. By the end of 2022, the supply was estimated to increase by an average of 4% per year. However, the Grade A & B vacancy rate is still below the 10-year average of 9.8%. As the supply remained unchanged, the occupancy rate in this quarter remained high.
By the end of 2020, the market will welcome more than 70,000 square meters of Grade B office for lease, mainly contributed by non-CBD offices, bringing the total supply for Grade A & B to 1.5 million square meters. Demand is expected to slow across the segment until the virus is stopped globally. Consequently, buildings that have a lot of vacancies may reconsider asking rents and leasing strategies to maintain the required capacity.
Demand: Demand is slow across segments
The negative impact of Covid-19 and economic instability weighed heavily on the need to the office for rent in HCMC. Grade B, with negative net absorption across existing buildings, has seen an increase in vacancy rates. Grade A office for lease, although backed by companies with a lot of money, are also under pressure.
The net rental real area was negative for the past three quarters, paid by tenants, and narrowed the premises. Several new buildings in both segments have had difficulty filling spaces due to the shutdown of new setup requirements and tight budgets for expansion and relocation.
Rental price: Rents have remained stable
In response to Covid-19, most landlords have kept rents steady q-o-q since the first boom in Q120, as they still seem confident in the current tight market. and limited future supply hopefully. However, short-term promotional rates are offered by buildings to attract and support tenants during this time.
After the pandemic was under control, businesses working in industries that were severely affected by Covid-19 became more cautious about renewing their contracts. Renewal contracts can be prepared for the short term. During the lease review period, the tenant is required to maintain the rental rate or the fixed rate for the next period. However, it should be noted that some newly completed buildings that are pressured to fill spaces tend to support tenants as much as possible. Rental offers such as free rental periods and flexible negotiation terms continued to be more popular this quarter due to a weak reception rate under the influence of Covid-19. However, in the long term, this will not last long as the market will soon recover thanks to the positive economic outlook.
The tendency of Office for rent in Ho Chi Minh
Due to the aftermath of the Covid-19 epidemic and the tendency to move away from the center, Grade B buildings quickly became a highly sought-after product for most small and medium enterprises and large enterprises.
Due to the impact of the COVID-19 epidemic, some tenants from finance, banking, technology, and newly established foreign SMEs have moved from Grade A to Grade B, or even lice look for buildings that have lower rental costs. There are tenants with abundant financial potential to move into Grade A office buildings, but the transaction volume is much less than the same period.
Despite the impact of Covid-19, the continuing inflow of FDI into Vietnam is evidence that foreign firms, namely Korea, Japan, Hong Kong, and even Europe are continuously increasing. enter the Vietnamese market and they are potential tenants for Grade A & B segments.
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