HCMC office market maintains momentum, awaits new supply
Ho Chi Minh City’s office market has recorded robust leasing transactions across all sub-markets this third quarter, thus keeping healthy performance, property services firm Knight Frank said Monday.
With no new office space coming online this quarter, Grade A recorded a vacancy rate of just 5.9%, a decrease of 0.7 percentage points quarter-on-quarter and a sharp drop of 7.8 percentage points year-on-year, Knight Frank Vietnam said in its Q3 report on the city’s office market.
With supply restricted, asking rents for this quarter maintained an upward momentum growing 5.2% year-on-year to reach $57.68 per square meter (psm) per month, including service charges.
Grade A office space in the city’s central business district (CBD) saw asking rents jump 4.3% year-on-year to $62.59 psm per month, showing positive net absorption of 1,548 sq.m as tenants have sought high quality downtown space in a limited market.

Buildings in District 1, the core of the central business district in Ho Chi Minh City, southern Vietnam. Photo courtesy of Knight Frank.
In comparison, Grade A in Saigon South in District 7 reported asking rents from $34.3, increasing 0.6% compared to the second quarter, with smaller net absorption of only 697 sq.m, making Saigon South vacancy hover at a more tenant-favorable 14.6%.
“The major move we observed in Q3 was Grade A tenants relocating or expanding within the existing Grade A supply, rather than Grade B tenants upgrading, which has resulted in Grade A rents remaining flat quarter-on-quarter,” said Leo Nguyen, director of Occupier Strategy and Solutions, Knight Frank Vietnam.
“Rent-sensitive Grade B tenants, meanwhile, showed a preference for older Grade B stock of five years and older, with leasing size of 500-700 square meters being the most active and at below $30 per square meter per month,” he added.
Grade B’s performance in Q3 was little affected by the addition of 19,965 sq.m to the market as Cobi Tower 1 & 2 in Saigon South came online. Grade B asking rents stabilized at $33.78, a drop of only 0.1% compared to Q2, and a vacancy rate of 8.4%.
Knight Frank data shows Grade B landlords are looking to keep rents flat to attract tenants with relocation and renewal needs, as a majority of sub-markets have kept their rents flat, except for the CBD and Saigon South, where asking rents went up by 0.6% and 1.9% quarter-on-quarter, respectively.
The bulk of transactions this third quarter came from relocations (48%), new acquisitions (32%) and renewals (20%), the Knight Frank report shows. Up to 70% of the major transactions were for leasing spaces between 1,000 and 2,000 sq.m. Notable tenants came from food and beverage (17%), information technology (16%), logistics (12%), electronics (12%), and co-working space (9%).
The report says considerable new supply for grades A and B is expected to come online in Thu Duc city on HCMC’s outskirts and the CBD, with a total of 176,931 sq.m and 127,410 sq.m anticipated to materialize by 2024, respectively.
After a long period of no new supply, Thu Duc is poised to see a surge of new office space which includes 75,000 sq.m coming online with the Vinhomes Grand Park project. Though this addition is not expected to affect the Grade B market performance in the CBD, it is a significant amount of new supply that will directly compete with decentralized areas such as other parts of Thu Duc, Saigon South, and north-west Ho Chi Minh City.
Overall, Grade A rents are expected to peak at $58 psm by the end of 2022 before dropping in 2023-2024, the property services firms noted. Asking rents for Grade B space will continue to slide but will stay at 55% of Grade A’s to accommodate new supply across both grades.
Leo Nguyen said, “Our view is that in the near future Ho Chi Minh City will remain a landlord’s market. With a large new supply entering the market in 2023 and 2024, especially if new buildings offer attractive rents and incentives, the market balance will shift towards the tenant.
“We advise tenants to monitor the situation closely and plan early to absorb costs associated with an office move, on top of the negotiated rent and appoint good tenant representation.”
As most multinational companies are now moving into budgeting season, the outlook for 2023 and 2024 is currently in the hands of CEOs and CFOs. They should be in tune with a shift in supply in 2023, he said.
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