Demand for office space in Ho Chi Minh City was weak in Q3 but improvement is expected in 2015.
At the end of Q3 Ho Chi Minh City’s office stock was estimated at slightly above 1.6 million square meters, according to the latest report from DTZ Research. One new project breaking ground in Q3 was the Vinhomes Tan Cang Project in Binh Thanh district, which comprises an office component, by Vingroup.
Net absorption of office space fell further in Q3 to approximately 16,000 square meters, after falling from 24,000 square meters in Q1 to 16,300 square meters in Q2, indicating that conditions remain challenging for office landlords. The average occupancy rate across all office grades, however, increased to 79.7 per cent in Q3 from 78.8 per cent in Q2, due in part to thin net supply in Q3. There are about 328,000 square meters of office space currently available for lease across the city.
Based on the construction schedules of office developments in the city an additional 280,000 square meters net leasable area (NLA) of office space is expected to be completed by 2015. These include Le Meridien Tower, with 19,000 square meters gross leasable area (GLA), in Q4 2014, and Vietcombank Tower, with 77,000 square meters (GFA), in Q1 2015. This potential supply will create more competition in the office market. Nevertheless, some office developers with limited financial resources may choose to delay their projects until market conditions are more favorable. Future supply may therefore be lower than forecasted. Nonetheless, on the back of economic improvements the demand for office space is expected to grow in 2015.