Absence of new supply sees existing space taken up, according to CBRE.
In the third quarter there was no new supply in either Grade A or Grade B office space in Ho Chi Minh City, according to CBRE’s quarterly report, which allowed the market to gradually absorb remaining space. The occupancy rate increased in new buildings while remaining stable in mature, old buildings.
One quarter has now passed since the implementation of the revised Law on Real Estate Business and foreign companies are seeking large spaces for long-term lease and sub-lease. A number of successful deals were recorded in the quarter, according to Ms. Dung Duong, Director of CBRE Vietnam’s Research and Consulting. “Foreign companies are also looking for buildings to acquire for their own use,” she added.
The Ho Chi Minh City office market did not witness any significant change in either the CBD or decentralized districts in the quarter.
There was a slow improvement in both asking rents and the vacancy rate in Grade A and Grade B. As there is limited supply in the market and continuous demand, Grade A and Grade B buildings in the quarter still recorded stable rents compared to the previous quarter.
Compared to the previous quarter, the Grade A vacancy rate decreased by 2.9 percentage points due to good leasing activities in the newly-opened Vietcombank Tower. The Grade B vacancy rate increased by 0.5 percentage points as tenants moved out to upgrade their offices.
Grade A recorded high net absorption, at 8,599 sq m NLA (net lettable area). This was lower compared to the second quarter but much higher than in the same period last year thanks to the high net absorption at Vietcombank Tower.
Grade B recorded a fall in net absorption as tenants moved out to better quality buildings with larger spaces. Net absorption in Grade B decreased by 112 per cent quarter-on-quarter and 182 per cent year-on-year.
Based on enquiries to CBRE, the top four most active sectors so far this year are IT/Electronics, Trading, Finance/Banking, and Logistics. Most renewals and expansion enquiries to CBRE came from tenants in the CBD area, while relocation enquiries mainly came from companies in non-CBD areas.
Regarding future supply, the next wave of office supply in Ho Chi Minh City will mainly focus on Grade A in the CBD area and is typically of a much higher quality with larger floor plates (varying from 1,500 sq m to 2,500 sq m) and includes mixed-use projects. This new supply is expected to come online between 2017 and 2020.