Tenant’s Advantage in HCMC Office Leasing Market
Entering 2023, the forecast is that office leasing in Ho Chi Minh City may decrease slightly and tenants will have an advantage in negotiation.
Tenants take the initiative in the office leasing market
The year 2022 is considered to be a “speedy” year for the office rental market when many office buildings with prime locations and leading brands in Ho Chi Minh City continuously experience price growth. rental and operating capacity.
Grade A office buildings in the city center such as Saigon Center (Le Loi street) with a leasable area of 45,000 m2, Diamond Plaza (Le Duan street) with an area of 16,000 m2 and Bitexco (Hai Trieu street) with an area of 16,000 m2. 37,700 m2… all increased by 15-20% compared to the beginning of the year, with the average rent at 57.73 USD/m2/month. Despite the increase in rents, the operating capacity of these buildings is always high, ranging from 80 to 85%.
Meanwhile, Grade B office rent remained stable at 33.78 USD/m2/month, and the vacancy rate was 8.4% (lower than the rate of about 15% in the Grade A segment). . Particularly, the Grade C office always achieved the highest occupancy rate, at 96%.
According to experts, due to the scarcity of supply, for a long time, the office market is dominated by lessors. But starting this year, when the supply increases, the competition in the office market will be big. It is likely that there will be a “change of throne” in which tenants will take the initiative, instead of the current landlord.
In 2023, office tenants will dominate contract negotiations. The reason is that Ho Chi Minh City will be added 333,387 m2 of Grade A and B office space in the next 2 years. 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 shift in the direction of favoring tenants.
Quoting the asking price of Grade A office space in the whole city this year decreased by about 2 USD/m2/month. By the end of 2024, the price will drop to 55.5 USD/m2/month and the vacancy rate will also increase significantly at 20%. With the Grade B office segment, customers are paying 33.68 USD/m2/month, but in the same period next year, the rent may decrease to only about 27 USD.
Consider lowering rents, improving experience trends of the office leasing market
The market “changed throne” forced the owners of office buildings for lease, especially those in the A and B segments, into fierce competition. Mr. Le Viet Hoa, the owner of a business that owns a system of 3 office buildings for rent in District 1 and District 3, said how favorable the office leasing operation in 2022 is, then in 2023 will be as fierce.
Tenants’ needs are changing dramatically, with higher requirements for workspaces with full amenities, flexibility, and services. Along with improving the quality of the building, lowering the rent or increasing the discount is also a factor considered by the owner of the office building. Currently, a number of office buildings that are about to be put into operation this year have introduced many competition policies, giving tenants more choices.
It is forecasted that in the next 3 years, the Ho Chi Minh City market will receive a series of new office projects with prime locations, such as The Nexus (2023), The Hallmark (2023), and The Crest Tower B (2023). ), The Sun Tower (2024), The Pearl (2024), and IFC One Saigon (2024).
The South of the City has dominated in terms of new supply, but from 2023 onwards, the East will emerge with an abundant supply of Grade A. The future high-quality supply in the Thu Thiem area with good traffic connections to the city center will create favorable conditions for the East area to become a magnet to attract reputable companies with great rental demand…
However, in the coming time, there will be some emerging trends in the main office market such as renovation and upgrading; office design for life; raise standards for sustainability. Specifically, old buildings in prime locations have now begun the process of renovation and refurbishment to improve quality and retain tenants.
You can read the previous article here: Office Leasing Out-central Districts You Should Rent