HCMC becomes Asia Pacific’s sixth most expensive office rental city

Ho Chi Minh City has become the sixth most expensive city in Asia Pacific to lease premium office space, according to a new study by property services firm Knight Frank.

Knight Frank has just revealed the rankings in its latest KFVN1000 Index, which measures how many square meters of Grade A office space that $1,000 can lease per month in 21 cities around the world.

HCMC, Vietnam’s southern economic hub, ranks sixth behind Hong Kong (7 m2), Singapore (11.4 m2), Seoul (13.7 m2), Sydney (14.3 m2) and Tokyo (15.7 m2) in the Asia-Pacific region; and comes 12th in the world, just behind New York.

In HCMC, $1,000 can rent 19.9 m2 of Grade A office space, according to the Knight Frank report.

Leo Nguyen, Knight Frank Vietnam’s director of occupier strategy & solutions, who is in charge of the index's findings, said: “We will see a massive influx of new Grade A inventory entering the Ho Chi Minh City office market between now and the end of this year.

“We are predicting rental decreases of between 10% and 20% over the next two years as the market moves from landlord-favorable to tenant-favorable,” he said.

Hanoi, the fourth most affordable city in the 2022 Index, slid to fifth this year, with tenants able to secure 37.6 m2 for their $1,000, up slightly from last year's 36.2 m2. Despite the 3.8% increase in value Hanoi is offering compared to 2022, Manila’s increase of almost 10% moves it slightly above the Vietnamese capital on the affordability ladder.

Other cities recording notable changes include Shanghai, where the reopening of the economy and its significantly underutilized supply saw the Chinese commercial hub rise from just under 17 m2 a year ago to 26.6 m2 on the current index, a change of 58%, according to the report.

Further large year-on-year shifts were seen in Seoul, where $1,000 can lease you over 20% less than last year; Bangkok, which moved 15.4% in the same direction; and Jakarta, which went the other way, with your dollar now renting you 15.3% more than a year ago.

Globally, London’s West End nudged out Hong Kong to claim this year’s crown as the world’s most expensive rental destination, offering just 6.6 m2 per thousand dollars.

According to the 2023 index, Kuala Lumpur was once again the world’s most affordable city to rent premium office space, with $1,000 typically securing tenants a spacious 72 m2 office. This sees the Malaysian capital offering 36% more real estate than the second most affordable city in the region – Jakarta.

Savills Vietnam, another property services firm, has just released its HCMC office market report, saying rentals in Thu Thiem Area on the other side of the Saigon River have increased to come closer to those in the central business district (CBD), which includes District 1 and District 3.

Each square meter of office space in District 1 costs an average of VND1 million-plus (about $43), but office rentals in District 1 and District 3 have reduced by 2% quarter-on-quarter and year-on-year.

However, according to the Savills report, office rentals in Thu Thiem have increased by 8% year-on-year with an occupancy rate of up to 99%.

In the first quarter of this year, office rentals in Thu Thiem averaged $38 per square meter per month, according to property services firm Cushman & Wakefield Vietnam.

In the second and third quarters, Thu Thiem is welcoming new Grade A office space with rentals offered at $52 per square meter per month, very close to those in District 1, the firm said.

Cushman & Wakefield Vietnam director Trang Bui said Thu Thiem is strongly competing with the city’s CBD and other districts, which are not newly developed like Thu Thiem.