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HCM City office market coming out of slump: property consultancies

After a two-year slump due to COVID-19, the HCM City office for lease market is showing positive signs with demand increasing in all segments.

After a two-year slump due to COVID-19, the HCM City office for lease market is showing positive signs with demand increasing in all segments.

A CBRE report said there was good recovery in the office market with total net absorption in the first quarter of 17,000 square metres (sq.m), equivalent to 32 per cent in 2021.

Relocation accounted for 55 per cent of the transactions, lease renewal for 25 per cent and expansion for 20 per cent, it said.

There were transactions for large areas in some high-quality grade B buildings in both the CBD and other hubs such as Thu Thiem new urban area, District 7 and District 10, the company said.

Savills said demand for office space was 16,500sq.m compared to just 1,500sq.m in the fourth quarter of 2021.

It partly attributed the increase to the city’s post-pandemic economic recovery.

It said the city economy grew at 1.9 per cent during the first quarter as against negative growth last year.

The number of new companies increased by 35 per cent year-on-year to 85,000 and 10,800 new jobs were created.

According to property consultancies, most of the demand for office space came from IT and logistics companies and those who well survived the pandemic.

CBRE said those actively expanding in Q1 were industries not heavily impacted by the pandemic such as IT and logistics.

“These two emerging industries accounted for nearly 60 per cent of total transacted areas. As IT, e-commerce and logistics are still the most active industries and have seen good investment in Viet Nam in recent years, CBRE expects them to continue contributing significantly to the office leasing market.”

Savills said the ICT sector continues to perform well.

Office demand from it and related sectors such as electronics manufacturing looks set to increase.

“As offices in the CBD are tightly held and ICT tenants often require large areas of over 1,000sq.m, they are increasingly interested in non-CBD areas, particularly District 2 and District 7.”

Tu Thi Hong An, commercial leasing director at Savills in HCM City, said: “Tenants from the IT sector are the most active, and are looking across all grades. Despite a supply shortage, rents are unlikely to increase as small office absorption is slowing down.”

New office model born

In a report about the market, Cushman and Wakefield said during the two years of the pandemic, the concept of working from home became a necessity if businesses were to continue operating amid the social distancing requirements.

This has made investors consider requirements for office space in the long term.

“The post-lockdown market is resilient with high demand and low supply. Hybrid offices are becoming increasingly popular and are now a viable and cost-effective solution,” An said.

Together with the growing hybrid workplace trend after the lockdowns, office spaces are also starting to offer employees unprecedented flexibility, prioritising efficiency and productivity in a modern sense.

With these new trends, there will be a push for companies to build satellite offices around the city to cater to their workforce. Offices will be spacious and offer modern amenities but without the expensive CBD prices.

An cited the example of OfficeHaus in Tan Phu, saying it provides the largest floor space in HCM City for lease (2,500sq.m) with state-of-the-art facilities that improve productivity and lead to happier workplaces.

Future supply

According to CBRE, the city is expected to add a total of 96,000sq.m of net leasable area in 2022 from two grade B buildings and one grade A building.

Rentals for both grades are expected to rise in 2022, with grade A rents set to reach a new high in 2023 along with a new wave of supply in the CBD and Thu Thiem new urban area.

Cushman & Wakefeild predicted that by 2025 the city would have more than 400,000sq.m of office space in prominent projects such as Cobi Towers I & II, Techcombank Tower, The Sun Tower, IFC One, Hallmark, and The Nexus.

According to Savills, 17 new projects with a total area of 526,000sq.m are expected to enter the market by then.

Economic recovery is expected to drive market performance this year, it added.

Source: VNS

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