Next Year’s Office Rental May Be Reduced
Experts believe that office rental in the city in 2023 may decrease slightly and tenants will have the upper hand in negotiations thanks to abundant supply.
Report on office rental
2022 is a beneficial year for building investors in the city. Accordingly, the rent of the Grade A office rental in the fourth quarter increased by about 2.6% compared to last year.
Office rental supply in Ho Chi Minh City so far has reached just over 2.5 million m2. This is a very low figure compared to the standards of regional markets such as Bangkok, Jakarta, and Manila with 6 million m2. This makes the supply scarce for tenants who need large and quality premises.
However, from the beginning of next year, this market is showing signs of shifting from favoring building owners to tenants. 2023 will be the first time since 2018, office tenants are likely to dominate in contract negotiations.
Office rental price in 2023
The reason is that Ho Chi Minh City will be added 333,387 m2 of Grade A and B office space in the next two years, increasing the total supply by about 23%. The first projects are expected to come into operation in the second quarter of 2023. Which, the focus is on two projects in Thu Thiem and one project in District 1 entering the market.
The two towers in Thu Thiem, along with a number of other high-end projects in the city center, will help the office market transform in the direction of favoring tenants.
The asking price of Grade A office rental space in the whole city next year will decrease by about 2 USD per square meter per month. Currently, the average rental price of this segment in the CBD is $57.73 per square meter per month (vacancy rate 5%).
By the end of 2024, this business thinks that the price will drop to 55.5 USD per square meter per month and the vacancy rate will also increase significantly at 20%. With the Grade B office segment, guests are paying $33.68 per square meter per month, but in the same period next year, the price may drop to about $27.
Particularly, the downtown area is vibrant in the Grade B segment. Many tenants accept to spend more time moving to the CBD in exchange for a rent of only $27 to $34 per square meter per month. In particular, the Saigon South area has emerged as an area that favors tenants, with an average price of 22.4 USD per square meter per month and a large floor space.
Logistics, financial services (including banking and insurance), and technology are forecasted by experts to account for the majority of big transactions next year. These will be the occupations with the highest demand for office rental space in the CBD.
However, in general, compared to other segments, the office market in 2023 and the longer term still has great growth potential.
You can read the previous article here: Small-Medium Enterprises Office Leasing Difficulties