Office supply increases, occupancy rate low

Abundant supply

The office rental market in Ho Chi Minh City for many years has been considered one of the segments that attracts customers, investors and brings profit value.

According to CBRE's report, in 2023, Ho Chi Minh City will see many new sources of supply in the mid-range and high-end office segments... Class A offices will see the appearance of the first two buildings in Thu Thiem, including The Hallmark (54,500m2) and The Mett (30,333m2).

Real Estate - Ho Chi Minh City: Office supply increases, occupancy rate low — Office supply in Ho Chi Minh City has continued to increase over the years.

Thanks to this new supply, the total office space in Ho Chi Minh City has reached approximately 1.6 million square meters of leasable area.

The latest report by Dat Xanh Services (a market research unit) shows that in terms of office space supply in 2023 (only considering the area of space available for actual use), Hanoi has about 2,100,000m2 of floor space and Ho Chi Minh City has about 2,600,000m2 of floor space, respectively increasing by approximately 1% and 2% compared to the same period in 2022.

In terms of office space occupancy rate in Ho Chi Minh City, it reached 91%, down nearly 2% compared to the same period in 2022. This figure is considered very good in the context of a very difficult market in general.

Real Estate - Ho Chi Minh City: Office supply increases, occupancy rate is low (Figure 2). — Office buildings around District 1 center are built by many businesses.

Office rental prices are recorded as quite stable, the average rental price in Ho Chi Minh City is nearly 32.5 USD/m2 - an average price increase of 3% - 5% per year.

According to records, currently in Ho Chi Minh City, the market is also witnessing the participation in the commercial office segment from large organizations such as banks and insurance.

Instead of simply renting office space as before, these businesses have now shifted to simultaneously exploiting office and commercial space in many prime locations across the country.

Supply - Demand out of phase

Since the Covid-19 pandemic, the “wave” of returning premises in buildings in the center of District 1, 3… or in suburban districts such as Go Vap, Phu Nhuan, District 2… has appeared continuously. Buildings on many main roads such as Nguyen Thi Minh Khai, Truong Dinh, Dien Bien Phu… still have a lot of vacant space and are constantly looking for tenants.

According to the Vietnam Association of Realtors (VARS), in 2023, the office rental segment in big cities like Ho Chi Minh City faces the risk of excess office space for rent due to the addition of many new quality supplies while old office buildings are not proactively renovated and upgraded.

Real Estate - Ho Chi Minh City: Office supply increases, occupancy rate is low (Figure 3). — There is currently a lot of office space for rent, but according to experts, the occupancy rate is not high.

Meanwhile, the wave of businesses returning premises has increased sharply, especially at the end of the year due to financial difficulties.

“After the pandemic, there are many changes in the economy and society... some businesses change their business strategies, downsize their apparatus or look to rent commercial buildings instead of renting offices in the center to reduce costs... this greatly affects the office segment. However, this is a general trend and at each time, businesses will have different strategies to adapt", said Mr. Nguyen Hong Hai - Chairman of VNO Group.

Real Estate - Ho Chi Minh City: Office supply increases, occupancy rate is low (Figure 4). — Compact and pre-arranged office space for rent to welcome tenants.

Speaking to Nguoi Dua Tin , Ms. Trinh Thi Kim Lien, Sales Director of Dat Xanh Services, said: “The office rental segment has a clear differentiation between old office buildings and new office supply sources. In particular, class A, B+ offices in the core areas of big cities such as Ho Chi Minh City are always in short supply while the demand from international customers and FDI enterprises is very large.

In addition, the occupancy rate is also uneven among segments: some premises have to register for a waiting list to be rented, but there are also premises that have been on offer for a long time but still have no tenants.

According to Ms. Lien, currently some banks and large enterprises have also begun to take advantage of their own internal resources. By building large office buildings and using unused floors and areas for rent. This is one of the large sources of supply that has appeared recently.

Experts predict that if the office space return continues to increase, there will be a possibility of businesses renting and rents decreasing, especially in old office buildings. From there, there will continue to be a supply-demand imbalance.

With the current economic situation, experts say the office market will still face many difficulties. Businesses need to prioritize appropriate distribution to reduce the pressure of excess office space.

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