HCM City’s office market is expected to have over 180,000 sq m of new supply in the pipeline, of which more than half will be concentrated in the central business district (CBD), according to Cushman & Wakefield Vietnam (C&W)’s first quarter report on the city’s office market.

Latest C&W report notes significant growth in Grade A and Grade B office-for-rent space in Q1.

One Grade B office building was completed in the quarter, supplying an additional 23,000 sq m to the market. 

There are currently ten Grade A and 51 Grade B office buildings, providing approximately 194,000 sq m and 769,000 sq m of space to the market, respectively. 

The Grade A and Grade B office-for-rent markets are growing well, the report noted.

Occupancy in Grade A increased nearly 2 per cent quarter-on-quarter and 5 per cent year-on-year, reaching 96 per cent. 

Meanwhile, Grade B recorded a 1 per cent increase quarter-on-quarter but represented only 95 per cent of the figure in the same period last year.

The report showed that total market absorption saw a record increase of 29,000 sq m, up 66 per cent quarter-on-quarter and 723 per cent year-on-year. 

Grade B represented 88 per cent, accounting for nearly half of all new office space for lease. 

Absorption in Grade A also saw a significant recovery from the previous quarter’s negative level, reaching nearly 3,400 sq m.

Average rentals in both Grade A and Grade B remained stable over the previous quarter but increased on a yearly basis. 

Grade A rose by 5 per cent and Grade B 1 per cent.

According to C&W, there will be 180,000 sq m of new leasing area in 2017, and all Grade A and more than half of Grade B supply will be concentrated in the CBD. 

Two Grade A office buildings scheduled for completion in the third quarter will provide over one-third of the total new office-for-rent area this year.

The market will experience a period of six to nine months where there will be a shortage of supply with moderate rental increases before returning to a tenant’s market in the second half of the year. 

However, there will also be pockets of spaces becoming available as tenants start relocating, helping to ease the limited supply.

“We have seen strengthening in asking rents across the city in the past 12 months and the market will welcome some much-needed supply during the remainder of the year,” said Mr. Alex Crane, General Manager of Cushman & Wakefield Vietnam. 

“Tenants should be preparing for a competitive market place as we will see more ‘churn’ of deals with a high number of big relocations. We have pent up demand from occupiers and the second half of 2017 will be a good time to strike competitive terms as landlords start to feel some pressure on their occupancy rates.”

VN Economic Times