In the context of increasingly fierce competition, in order to survive, office leasing investors must change their strategies by competing on price and product quality.
Office rental market: Competition is not only about rental price
In the context of increasingly fierce competition, in order to survive, office leasing investors must change their strategies by competing on price and product quality.
The Grade A office market in Ho Chi Minh City last quarter welcomed new supply from the Thaisquare The Merit Project (District 1) developed by Thaihomes Real Estate Development Joint Stock Company. This project has helped increase the total Grade A office supply in Ho Chi Minh City by more than 12,000 square meters.
According to forecasts by Avison Young Consulting Company, in the period of 2024 - 2026, Ho Chi Minh City is expected to have an additional 429,300 m2 of office space for lease. Most of the new supply will be concentrated in non-central areas, such as Thu Duc City, District 7, with prominent projects such as UOA T2 and V-Plaza Towers.
Avison Young believes that with the advantage of large land funds, these areas have the potential to develop large-scale office buildings. In addition, thanks to the advantage of developing infrastructure, future projects will have more competitive rental prices compared to office buildings in the central area of Ho Chi Minh City.
The increase in new supply gives tenants more choices and more incentives than in the previous period. However, to compete with the new supply, old Grade A buildings must adjust their rents.
Ms. Pham Ngoc Thien Thanh, Head of Research and Consulting at CBRE in Ho Chi Minh City, said that since the beginning of the year, the number of office buildings planned to be deployed has been lower than initially planned due to changes in business strategies from investors. However, the rental price of Grade A offices outside the city center increased by 1% quarter-on-quarter, while Grade A in the city center decreased by 1%, with an average of 45.5 USD/m2/month. The rental price of Grade B offices has also begun to decrease accordingly, at 26.1 USD/m2/month, down 0.6% compared to the previous quarter, but still 2.1% higher than the same period last year. However, compared to the past 3 years, the rental price is still very high.
According to Ms. Thanh, large transactions mainly come from Class A buildings, while Class B has shifted to smaller areas, mainly transactions with areas of 100 - 300 m2.
CBRE Vietnam said that from the last quarter of 2024 to the end of 2026, the market is expected to have only 2 more Grade A office buildings in the central area and one Grade B building in the fringe area, with a total expected supply of more than 100,000 square meters of floor space.
Mr. Le Hieu, a businessman who owns two office buildings in District 3 and District 10 (HCMC), said that from 2023 to now, the office rental market is facing a big challenge as the new supply of quality is increasing, but the "wallets" of tenants are decreasing.
According to Mr. Hieu, in the past, investors of Grade A buildings often had the right to choose tenants and set strict terms, but now the top priority is to fill vacant space. He commented that the needs of tenants have changed significantly, focusing on convenient, flexible offices with comfortable working environments.
“With new buildings entering the market, investors need to update and improve space and services to retain customers. The competition is not only in rental prices, but also in the ability to meet the increasingly diverse needs of businesses,” said Mr. Hieu.
Meanwhile, Mr. Matthew Powell, Director of Savills Hanoi, acknowledged that the trend of choosing an office by tenants depends on many factors and price is not the only factor that businesses consider, especially for tenants who tend to upgrade their offices to high-end buildings.
Mr. Matthew Powell said that the Savills team has noted the difference between certified green buildings and non-certified buildings. Older buildings that do not meet green standards will face greater pressure to reduce rents, when they cannot compete with certified buildings. Evidence shows that some landlords, especially for Grade B offices, have had to reduce rents to retain tenants.
“Price is obviously important. But like anything else, many people are willing to pay for quality experiences. Just like buying a car, clothes or handbags, sometimes a price difference is acceptable for higher quality products and services,” said Savills experts.
Source: https://baodautu.vn/batdongsan/thi-truong-van-phong-cho-thue-cuoc-canh-tranh-khong-chi-nam-o-gia-thue-d230567.html
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