Market Office for rent in Q2/2020 [HCMC]

Market Office for rent in Ho Chi Minh City in Q2/2020 saw a decrease in supply as well as a shift in demand for office space to reduce costs due to COVID-19.

Office supply for rent

In QII / 2020 there is no new supply of Grade A & B offices. The supply is quite limited despite a new Grade C building completed in the quarter.

Besides, the negative net absorption area in many buildings in this quarter was due to the early repayment by customers due to financial difficulties. The market is still considered to be quite limited in terms of supply with the vacancy rate reaching 8.0% in Q2/20

Demand for office space for rent

The office market was not immediately affected by Covid but began to suffer in Q2, specifically, tenants experienced a decrease in revenue in the first 6 months. Some businesses are forced to cut back and relocate to save costs. Sales in the first half were more than 52,000 m2, up 74% year on year. However, in Q2 / 2020 alone, the negative consumption at -32,000 m2, the net absorption area was recorded negative for the first time in a decade, at -3,619 m2 in Q2.20, about 44% of enterprises had close, narrow the area, or move to a townhouse.

The main reason is that small and medium enterprise, which are the main source of tenants in Grade B offices, have reduced their size and terminated their contracts early due to the impact of Covid-19 epidemic. The Grade A office market, although better able to endure thanks to tenants being companies with good financial resources, is also under pressure. This is evidenced by signs of a slowdown from the need for expansion and new establishment of businesses during a pandemic.

Office rental price

Grade A & B rents continue to rise, mostly due to higher rents compared to previously rented during the quarterly renewal transactions, while most landlords kept their rates unchanged. quarterly stability for other types of lease transactions (eg office relocation). Grade C became the most sensitive segment with the economic slowdown, rents decreased by -0.4% QoQ.

However, with weak demand under the impact of Covid-19, policies to support tenants, such as rent assistance or landlords more flexible in negotiating, applying preferential terms, some owners Invest to reduce rents up to 20% in 3 months, Grade C projects offer discounts of 5 – 15% in order to attract new tenants.

Office Market prospects

As the global economy remains volatile, especially under the impact of the Covid-19 epidemic, tenants of Grade B&C Offices will be affected first and may be followed by Grade A tenants if the global epidemic situation Uncontrolled early. Therefore, depending on the evolution of the epidemic in the near future, buildings with large vacant areas, it may be likely to reconsider rental prices and strategies to maintain the required occupancy rates. The economic downturn will continue to impact tenants and challenge the market in the second half of the year. Besides the new supply coming into the market in the near future, the increase in vacant space will push up the negotiation of lease terms. However, Vietnam is still the fastest growing economy in Southeast Asia, and with bright prospects in the long term, Vietnam is still the best destination in Asia.

Office rental trend

• Narrow office area
• Relocating an office to a lower-cost location
• Consider replacing office options in the central edge of the area
• Rent and share the premises with former tenants to save on office rental costs and office set-up costs.

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