After office rents peaked in 2007, they have continuously decreased due to oversupply and the global financial crisis one year later. However, financial woes have seen the construction of some office projects in the second city put on hold or delayed, leading to a smaller supply of quality downtown space.
Grade A office rent in the central business district (CBD) has started to harden and remained quite stable over the last quarter, at average $32-33 per square metre per month. According to Colliers International, Grade A buildings, with exception of Bitexco Financial Tower which remains in the lease-up phase, has a generally stable occupancy rate at 97 per cent in the second quarter.
The 68-storey tower is reporting occupancy of 60 per cent following a significant take-up of office space in the first half of the year, with a number of deals in the pipeline which could push this rate significantly higher. It is currently offering monthly rents ranging from $30-55 per square metre (exclusive of VAT and service charges).
Bitexco Financial Tower developers are also advising potential tenants to act fast if they want to secure a space in this prestigious building.
“The ‘wait and see’ period is over, and the window of opportunity is closing,” said William Badger, director of marketing for Bitexco Group. “We’ve recently seen potential tenants lose out on space by waiting too long. So tenants need to act fast if they want to secure space that best fits their needs.”
The tower’s tenant list now includes such blue-chip tenants as Samsung, Ernst & Young, Allen & Overy, Toyota Financial Services, Adidas, Hoffman LaRoche, Mastercard and Sotheby’s International Realty, with this list likely to grow in the next few months.
Colliers International records that a ‘flight to quality’ is starting to take hold with new Grade A buildings like Bitexco Financial Tower welcoming new businesses to Vietnam and established companies looking to upgrade their accommodation.
Stephen Wyatt, country manager of Knight Frank Vietnam, added: “With limited development activity in the Grade A office market in the past two years, existing supply is slowly being occupied.”
In a report released early last year, CBRE forecast new Grade A and B office supply in the southern hub could climb to 390,000 square metres this year. However, it has revised supply for this year to 165,000sqm due to delays in construction.
In particular, while the market had expected to see around 84,000sqm of new Grade A office space come online in the CBD this year, stalled construction on a number of key projects means the actual figure will only be around 8,000sqm.
“With so many buildings running late or slowing down we are seeing a “temporary bottoming out” of the office rental market in Ho Chi Minh City,” said Marc Townsend, managing director of CBRE.
Wyatt echoed Townsend’s comment, saying: “With occupancy levels increasing and very little Grade A space available, landlords will find themselves in a stronger negotiating position and we will start to see less incentives and increased rentals being achieved.”
Agents have taken note, and are quickly encouraging their clients that time is of the essence. “We are advising multinational companies that have a capex budget to relocate and to take advantage of historically low rents,” said Townsend.
Savills also stated that although the average rent was expected to decrease further in 2012, it predicted the average rent would increase by approximately 15 per cent in 2013 and 12 per cent in 2014.
“The first stage of Savills two-stage forecasting model has showed that demand for office spaces in Ho Chi Minh City will remain and consistently increase in 2013-2014. Therefore, with the balance of net new demand and vacant spaces in the next two years, the second stage of the forecasting model showed that Ho Chi Minh City’s office market will be better in 2013 and 2014,” said Truong An Duong, head of research at Savills Ho Chi Minh City.
Linh Giang (vir.com.vn)