Rental prices in Thu Thiem still grow against the market trend

Scarcity of rental space

With rental prices remaining high and few posts on forums and real estate markets, Thu Thiem can be considered a special case compared to the rest of the rental market at the present time.

According to some surveys, while many places in the center of Ho Chi Minh City have had to reduce rental prices or leave premises vacant for many months due to not finding tenants, in densely populated areas in Thu Thiem, the rental market still increased by 8% compared to last year. There are also many office products for rent in the A+ office segment, attracting many people's attention due to better prices compared to District 1.

In some areas such as Sala Urban Area, office rental capacity always reaches over 90% occupancy rate. This is a high level compared to the current market, explained by the fact that the supply of this type is quite low, not meeting the demand. With large area products or shophouses in this urban area, the rental price is up to hundreds of millions of VND per month.

However, the number of rental products posted on online real estate markets is very small. For example, at batdongsan.com.vn, there are only about 12 listings in this area, the highest price is up to 380 million VND/month for a shophouse area of 1,400m2 and the lowest is 19 million VND/month for a 40m2 area.

The price of rental space in Thu Thiem is still increasing in contrast to the market decline, picture 1 — The number of products for rent on real estate markets in the Nguyen Co Thach street area is very small.

According to some brokers, since its operation in 2018, the rental market in Sala Urban Area has always been vibrant and sought after by many people, mainly concentrated on Nguyen Co Thach Street. There are premises for rent during peak periods that can reach up to 500 million VND/month.

Anh Minh - a real estate broker, specializing in leasing products in this area said: "The tenants here mainly do business in food and beverage, company offices and most of them rent as bank headquarters. Large premises used to be rented by interior design companies, but now they have been transferred to some large businesses and banks to rent as headquarters."

This broker also said that the current price recorded on the real estate market is not the highest price because some of the most beautiful and spacious premises in this area are still unoccupied. The prices posted by the premises owners have also increased slightly compared to the previous time. The premises for rent in this area are always in high demand so there has not been any case of having to reduce the rent to find another one.

Explaining this, Mr. Minh said that this area has a dense population, with many corporate offices, so many banks have flocked here. Most of the large premises are leased long-term by banks, so very few large premises over 500m2 are left vacant in this area. In addition, with the development of such a large number of office workers, smaller premises are also leased by food service businesses and have good revenue, so there is a shortage of rental premises.

Bright spot in rental market

According to a study by Savills Vietnam, Thu Thiem is a new factor in the office market with positive developments. While other areas show signs of adjustment, Thu Thiem still maintains its growth rate.

Specifically, the average rental price of office towers in District 1 is more than VND1 million per square meter per month, while Grade A offices have a rental price decrease of 2% quarterly and annually. Similarly, District 3 also recorded a 2% decrease in rental price.

Explaining this, Savills said that this is because this area is gradually forming a new center, attracting much attention from tenants. The traffic infrastructure in Thu Thiem conveniently connects to the old center while the rental price is quite competitive compared to class A and class B office buildings throughout the city.

The price of rental space in Thu Thiem is still increasing in contrast to the market decline, picture 2. — Many favorable factors have helped densely populated areas in Thu Thiem develop a good rental market.

In addition, office buildings in Thu Thiem are all aiming towards green offices according to international standards, integrating technology, design and reasonable space arrangement to help save 20% of rental area compared to office models designed according to old standards.

According to previous data from Cushman & Wakefield, in the first quarter, office rental prices in Thu Thiem were recorded at 38 USD/m2/month, breaking out into the office group that received more attention than the rest of the market. This average price remained stable quarter-on-quarter and increased slightly year-on-year while the overall market showed signs of adjustment within a narrow range.

In the second and third quarters, Thu Thiem will welcome new Grade A supply officially coming into operation with asking rents of around USD 52/m2/month. This new rental price milestone is approximately equal to the average rental price of Grade A and B offices in the core area of District 1.

In addition, in the future, with the introduction of many products with high-quality buildings, modern services and utilities, Thu Thiem will be a direct competitor to the old downtown area and the remaining districts of Ho Chi Minh City. In particular, office towers in Thu Thiem can meet the demand for space up to 1,600-1,800 m2 on a floor, while in District 1, it is difficult to find products that meet the demand for renting space of more than 1,000 m2 on a floor.

The above factors show that the rental market growth in Thu Thiem area is growing, soon catching up with the city center areas, which are currently in a slump. This could be a bright spot leading the market in late 2023 and early 2024.

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