Demand for Grade A office space increases
The real estate market has recently seen many positive changes, in which the commercial and office real estate segment is "reviving" and returning to the race.
In the office leasing segment, demand for offices, especially Grade A offices in central areas, remains high. However, supply has not changed significantly. However, projects under construction and expected to be completed in the second and third quarters of 2024 will contribute to improving supply in the medium term.
Green and utility standards are increasingly being raised to meet the requirements of international customers, while promoting the sustainable development of the office market.
The central area of District 1, Ho Chi Minh City attracts many businesses to rent offices.
Mr. Luu Quang Tien, Deputy Director of the Institute for Economic - Financial - Real Estate Research, Dat Xanh Services, assessed that currently, in the first quarter of 2024 alone, key indicators such as total supply and average rental prices remain stable quarterly in both major cities, Ho Chi Minh City and Hanoi, with a total supply of 2.1 million square meters.
The average rental price is approximately USD 21.5/m2 in Hanoi compared to a total supply of approximately 2.6 million m2 and the average rental price is approximately USD 32.5/m2 in Ho Chi Minh City.
Mr. Luu Quang Tien, Deputy Director of the Institute of Economic - Financial - Real Estate Research Dat Xanh Services.
In terms of average office space occupancy rate across the market, Hanoi saw a slight increase at ~85% (up 1 percentage point quarter-on-quarter), Ho Chi Minh City reached ~91%, remaining stable compared to the fourth quarter of 2023.
Assessing the current rental market, Mr. Nguyen Hong Hai, Chairman of VNO Investment and Development Joint Stock Company (VNO Group; real estate development unit, office leasing...) said: "Since the beginning of 2024, the rental market has received many positive results, the office leasing system in Ho Chi Minh City has an abundant supply. Especially in recent years, large investors such as real estate corporations, banks... have participated in the construction of office buildings for both use and re-lease, so the supply is large and prices are competitive".
“In addition, the high-rise buildings are all located in central locations, with convenient infrastructure to attract foreign investors to rent. Currently, the central areas of District 1, 3 and Thu Thiem, Thu Duc City have many Class A office buildings rented by foreign enterprises. Investors hire professional operators from abroad to expand the market, so the occupancy rate of Class A office segments is currently very high,” said Mr. Hai.
According to experts, office rental prices in Ho Chi Minh City will continue to increase. Because the economy is currently recovering, foreign businesses are increasingly looking for it, so office rental can be assessed as being in the recovery phase.
Occupancy rates and rents increase
According to the first quarter 2024 investment report for the Asia-Pacific region by Savills (the world's leading real estate service provider), the office index in Ho Chi Minh City is currently up 1% compared to the previous quarter and 2% compared to the same period last year to 98 points.
The index in the major city's central business district (CBD) rose 1% quarter-on-quarter but fell 1% year-on-year to 107.
Occupancy decreased 1% QoQ and 4% YoY to 90% due to a new project with a low occupancy rate of 55%. Rents increased 3% QoQ and 7% YoY to VND1 million/m2/month.
The non-CBD index was stable compared to the previous quarter and increased 6% year-on-year to 114 points.
According to Savills statistics, office rents improved across all 15 districts, up 1% quarter-on-quarter and 11% year-on-year to VND595,000/m2/month. Occupancy rate reached 89%, up 1% quarter-on-quarter but down 1% year-on-year.
A corner of Thu Thiem area, Thu Duc city (bordering District 1) has a series of class A office building projects.
In fact, the Ho Chi Minh City market was previously mostly concentrated in one area, District 1, which provided the main office supply. Currently, this market has recorded a shift to the Thu Thiem area, with new office supply, large floor space and many green certified projects.
Meanwhile, the office rental market in Hanoi is also relatively stable with the index recording 69 points, not fluctuating much by quarter and year. The occupancy rate of Class A is 88%, up 3% compared to the fourth quarter of 2023 and 8% compared to the same period last year.
Grade B occupancy was 85%, stable QoQ and down 1% YoY, while Grade C occupancy was 91%, down 1% QoQ and YoY.
The increase in office rental index makes this real estate segment bustling and creates profits for businesses participating in this field.
The CBD office index fell 1% year-on-year to 87. The average rent of VND783,000/m2/month was up 2% quarter-on-quarter but down 1% year-on-year. Occupancy was also stable quarter-on-quarter and up 2% year-on-year to 92%.
The non-CBD office index was stable QoQ at 81 and up slightly 1% YoY. Occupancy increased 1% QoQ and 2% YoY to 87%. Average rents were stable QoQ and up 2% YoY to VND485,000/sqm/month.
Matthew Clifford, Head of ESG Sustainability, Asia Pacific, Cushman & Wakefield, believes there are still numerous opportunities for developers and investors to enhance social inclusion across the Asia Pacific urban landscape.
“If we look at key office hubs, developers can try to meet the more nuanced and holistic needs of not only their office space users but also the communities who live nearby or pass by the building on a daily basis. From an investment perspective, developing the economic and social values of the asset in parallel also impacts the overall return,” said Matthew Clifford.
Businesses that rent real estate can also contribute to the social fabric of inclusive cities. By partnering with local businesses in their supply chains or hiring locals, corporations can drive social value and economic growth in communities.
They can also choose to locate in well-connected and accessible locations, close to amenities such as healthcare and education facilities; and adopt a holistic approach to office design and decoration. These will help improve the workplace experience and quality of life of employees, leading to increased engagement and organizational performance.
“In short, the attractiveness and long-term viability of a city is deeply shaped by the social value it fosters. Inclusive cities attract more talent and drive innovation, leading to investment and economic growth. Furthermore, they can provide diverse socio-economic bases for their residents. Resilience and adaptability also enable cities to meet the evolving needs and expectations of their residents and stakeholders. It is therefore important that the real estate sector wholeheartedly embraces and integrates inclusive values into all its activities, thereby accelerating the journey to create urban environments that prioritize inclusiveness,” said Matthew Clifford.
Source: https://www.nguoiduatin.vn/bat-dong-san-van-phong-tp-hcm-van-tiep-tuc-tang-gia-a670639.html
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