A corner at the Grab office in District 7 of HCM City where staffs can relax or enjoy lunch. Companies in sectors less affected by economic crises are driving major transactions in the office market in HCM City. — VNS Photo Thu Ngân

The sectors include finance, banking, insurance, manufacturing, life sciences, healthcare, and pharmaceuticals, they said.

Property consultancy CBRE said in a note that in HCM City the finance, banking, insurance, manufacturing, life sciences, healthcare, and pharmaceutical sectors are less affected by the crises or have strong financial foundations, and often include large corporations with long-term expansion plans in Việt Nam.

Another property consultancy, Knight Frank LLP, reported that 2023 mostly saw tenants in the banking, insurance and technology sectors relocating, while many finance and oil and gas companies renewed their lease. 

Experts said 2023 saw the biggest surge in office market supply since 2019, with HCM City adding nearly 170,000sq.m of net leasing area. 

Most of the new projects were grade A office developments and in prime locations, including The Nexus and VPbank Saigon Tower in District 1 and The Mett and The Hallmark.

Nevertheless, the asking rents for grade A and B offices showed little change. 

Nearly 80,000sq.m of new space was absorbed, over 90 per cent at four grade A buildings. 

Rentals for grade A and B offices remained at US$46 and $25.8 per square metre per month respectively, CBRE said.

Tenants tend to research office space and sign lease agreements early -- before buildings are even completed -- to secure better rentals. 

According to CBRE, in both Hà Nội and HCM City, there is a preference for high-quality office space, especially among multinational companies. 

Despite the economic downturn, the abundant supply has enabled tenants to negotiate favourable rentals for high-quality offices. 

Relocation accounted for 48 per cent, with most transactions involving a move to newer, higher-quality office spaces with competitive rents.

Cushman & Wakefield said with the persisting financial constraints, tenants remain cost-conscious. 

So some landlords are willing to lower rents even for grade A buildings in the central business district (CBD). 

Meanwhile, tenants who can afford to capitalise on this buyers’ market are using the opportunity to upgrade.

Landlords of old buildings in the CBD are taking the opportunity to renovate and enhance their properties’ competitiveness for the time when the market recovers.

New year forecast

CBRE expects new supply in 2024 to be around 53,000sq.m, primarily in non-CBD locations.

Thanh Phạm, head of research and consulting at CBRE in HCM City, said: "Given the uncertain economic recovery and ample supply of office space, rental rates are expected to stay flexible, with lease terms that are more advantageous to tenants.

“Only a selected few high-quality projects situated in prime locations with convenient access and outstanding features, such as green certification and diverse amenities, might see a slight rental increase in 2024.

“Green and sustainable factors are likely to become increasingly prevalent in future contract terms."

Knight Frank LLP said the new supply coming in the next few years would see a flight to quality from grade B to A. 

“This shift will put pressure on rents, especially existing and older buildings, across both grades,” Leo Nguyen, director of the company’s occupier strategy and solutions, said.

By 2026 the market is expected to add 130,000sq.m of new supply in grade A, he added.

With this new supply, Knight Frank forecast vacancy rates to remain in double digits -- around 20 per cent for grade A and 14 per cent for grade B -- in the next three years. 

This would have different effects on rents, with grade A expected to drop and put in continued pressure on grade B, it added. — VNS