Office for lease in Ho Chi Minh under the impact of covid-19 [Forecast]
Although market of office leasing in Ho Chi Minh in Q1/2020 has not been negatively affected by the COVID-19 pandemic, but with the complicated movements of the Covid-19 pandemic in Vietnam as well as many other major countries in the world, the demand about office space is much affected in the short term, market of office for lease in Ho Chi Minh City is be forecasted to go through a difficult period due to the effects of the Covid-19 epidemic in the short term but it will rebound strongly after the end of the Covid-19 epidemic.
- Supply: By 2022, the market will have an additional 360,000m2 of floor area, of which, 63% will be located in non-CBD areas, reflecting the trend of moving out of the central area. In the next 9 months of 2020, 16 new projects are expected to enter the market, providing more than 160,000m2. However, future projects may be delayed or delayed by the effects of COVID, isolation measures may result in a shortage of materials and disruption of construction progress.
- Demand: By the end of Q1 / 2020, the epidemic developed at a rapid pace, causing business activities to be delayed across the country. Most companies have asked employees to take turns working at home to comply with social isolation regulations, which has caused many offices to be closed in whole or in part. In Q1 / 2020, about 18,600 enterprises across the country stopped business, increasing by 26% year on year. If the epidemic continues into Q2 / 2020, the Ministry of Labor has estimated that about 2-3 million workers will have to take temporary leave. The office market will inevitably be affected when tenants reconsider their real needs for manpower and leased area.
Existing tenants have been persuading landlords to cut rents by 15% – 20% in order to reduce losses when the business situation is going down, landlords currently do not have direct measures to cut rates. However, it is also considering reducing prices in the short term or delaying the collection of rent until the end of the period for tenants with business situation seriously affected by the epidemic.
In addition, some transactions have been postponed or canceled at the end of the first quarter of 2020 because the tenants are foreign companies who have difficulty seeing the premises. This may lead to the situation that the market is difficult to absorb new areas, especially this year. Ho Chi Minh City is expected to have more than 70,000 m2 NLA. Therefore, the market vacancy rate will still increase whether the epidemic ends sooner or later. If the pandemic situation can be controlled before June 2020, the vacancy rate will only increase from 7% – 14%. If the Covid-19 pandemic was controlled by September 2020, the average vacancy rate of the office market could increase to 14% -16%.
Regarding the rate of rent increase, before Covid-19 broke out, Ho Chi Minh City office market is expected to have many potential price increases in 2020. In Q1 / 2020, the market has not noticed the negative impact. from pandemic to rent. If Covid-19 is stopped in the first two quarters of 2020, the rental growth of the HCMC market can still maintain at a positive level.
It is forecasted that landlords will offer more incentives to attract new tenants, to make up for the narrowing of space from existing tenants. However, if the Covid-19 epidemic is under control by September 2020, the worst forecast is that rents will fall by 8% to 10% – in cases where companies continue to suffer losses and are forced to fall in love. rent to the landlord.
In the past few years, Vietnam’s economy has entered a period of strong growth, multinational companies are coming to Vietnam more, making the demand for offices increasing. This is reflected in the office rental performance. Specifically, Ho Chi Minh City has historically had a low vacancy rate, with rents rising in the context of limited supply. If the disease does not occur, the office rent in Ho Chi Minh City will continue to increase, in the context of the current epidemic market and office rents may be affected in the short term and will soon increase again.
On the positive side, the Covid-19 pandemic and this time is an opportunity for companies with sufficient resources and are intending to establish or expand business in Vietnam to find an office for lease in Ho Chi Minh with the best rental price.
Moreover, you will have the most affordable tenancy agreements when work with an local agency with their market knowledge, experience and networks & relationship with local building managers.
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