According to a real estate market report on Ho Chi Minh City for the first half of 2023 from Savills Vietnam, despite the general slowdown in the market, the office segment is thriving with steady activity, strong demand for leasing, and a promising supply of high-quality office space until the end of year. Of note, high-quality projects in District 1 and the new Thu Thiem urban area will contribute 91 per cent of total new supply.

The report reveals that the office leasing market experienced a slight 1 per cent decrease in the second quarter due to some small and medium-sized enterprises (SMEs) vacating Grade B and C buildings. Rental prices also remained steady compared to the previous quarter, at $31.6 per sq m per month, for a 4 per cent increase year-on-year. Specifically, Savills’ Research Department highlighted that Grade A office buildings performed the best among segments, with occupancy reaching 94 per cent and rental prices $59.2 per sq m per month.

The market is expecting a significant influx of new supply in the second half of the year, with 237,000 sq m from 13 projects. Grade A offices are expected to dominate, with a 64 per cent market share. The central area will account for 56 per cent of future supply, with notable projects such as Nexus, VPBank Saigon Tower, and The Waterfront Saigon, while the new Thu Thiem urban area will contribute 35 per cent from projects like The METT and The Hallmark.

Savills’ survey of transactions in the first half of 2023 shows that relocations accounted for the largest share, at 34 per cent, followed by new setups with 29 per cent.

The largest tenant groups were in the Financial, Insurance, Real Estate (FIRE), Information Technology (ICT), Distribution, and Consultancy sectors. FIRE tenants held a 27 per cent market share, down 2 percentage points compared to the previous year, while ICT tenants accounted for 24 per cent, down 5 percentage points. Distribution tenants occupied 19 per cent, up 7 percentage points, and Consultancy 16 per cent, up 8 percentage points.

An additional 360,000 sq m of new office space is projected to enter the market by 2026. In terms of office trends, demand for green offices is increasing and is likely to impact supply.

Over 70 per cent of future Grade A and B office supply in Ho Chi Minh City by 2026 is expected to be green-certified. Compared to other major cities in the region, Ho Chi Minh City’s Grade A offices had lower vacancy rates and higher rental prices in the second quarter of 2023 than Jakarta, Kuala Lumpur, and Bangkok. Compared to other emerging office markets in the region, Ho Chi Minh City is considered a bright spot due to its dynamic and vibrant economic growth. It ranked 83rd in the top 100 newly-emerging startup ecosystems worldwide in the 2023 Startup Genome report, which is a positive sign for future office leasing demand.

“The Grade A office market in Ho Chi Minh City performs well compared to other cities in the region,” said Ms. Giang Huynh, Deputy Director, Head of Research and S22M at Savills Ho Chi Minh City. “The diverse future supply will continue to meet the market’s absorption capacity.”

According to Oxford Economics, by 2027 the service sector is forecasted to dominate the southern city’s GDP and will lead demand for office space, with key sectors such as real estate, tourism, and dining.

Source: VNECONOMY