Specifically, according to real estate consultancy Knight Frank, the current asking price for Grade A office space on a quarterly and annual basis increased by about 2% in the second quarter of 2023, reaching USD 58.92/ m2 /month. The vacancy rate decreased to 4.2% compared to 4.9% in the first quarter, showing little fluctuation before new supply enters the market.
Mr. Leo Nguyen, Director of Strategy and Tenant Solutions at Knight Frank Vietnam, commented that in the coming time, building owners will face many challenges from the supply of Grade A entering the market. Notably, office rental prices in old Grade A and B office buildings will change significantly. When the occupancy rate reaches 75%, the asking rent of some of the above buildings will decrease by up to 20%. Accordingly, the asking rent of Grade A offices is forecast to decrease to 53 USD/ m2 /month by the end of 2023, 48.50 USD/ m2 /month by the end of 2024 and 44.50 USD/ m2 /month by the end of 2025. The vacancy rate will also increase to 29%, 24% and 32% respectively, showing major fluctuations in the office rental market in Ho Chi Minh City.
The outlook for Grade B offices is even bleaker, as this segment will be hardest hit by the market trend that increasingly favors tenants. Grade B office rents are currently at $34.10/ m2 /month, with a vacancy rate of 12.3%, similar to the previous quarter and up 4.1 percentage points year-on-year. Rents for this segment are forecast to fall to $28.50/ m2 /month by the end of 2023, $26.50/m2/month by the end of 2024, and $24.50/ m2 /month by the end of 2025. Vacancy rates will also increase to 14%, 17%, and 20%, respectively, each year.
A new Grade A+ office building has just been put into operation in Ho Chi Minh City.
According to Savills' report, in Asia-Pacific, office rental demand is expected to increase with low office vacancy rates. In the first months of 2023, Tokyo, Seoul and Ho Chi Minh City are the top 3 cities with the lowest vacancy rates in the region, with just under 4% of vacant offices. The main driver for this trend is the growth of the economies in the region, leading to increased demand for office rentals. In addition, the work culture requiring direct interaction and connection in Asian countries has increased the demand for office space when employees return to work.
In the office leasing market in Hanoi, Ms. Hoang Nguyet Minh, Senior Director, Commercial Leasing Department, Savills Hanoi, said that the current demand is mostly from the group of businesses in the fields of legal consulting, financial consulting - groups that continue to expand their operations. In addition, the group of information technology companies still recorded rental demand. Meanwhile, start-up companies recorded a slowing trend, even returning office space this year, thereby causing fluctuations in occupancy rates as well as office rental prices in the Hanoi market.
According to Ms. Minh, the Hanoi market is expected to continue to record a decrease in demand in the last 6 months of 2023 compared to the same period last year. "However, this is the time when tenants start to consider moving offices in 2024 thanks to expectations of economic recovery. Therefore, for new buildings in 2024 or buildings in the process of completion, 2024 will be the year with higher expectations for an increase in the occupancy rate of buildings as well as a recovery in rental prices," Ms. Minh commented.
Although each market has its own characteristics, situation and development dynamics, Grade A offices that meet sustainable criteria are assessed to continue to attract global tenants.
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