HCMC office market net absorption to drop 50% in 2025: Knight Frank

Total net absorption in Ho Chi Minh City's office market might decrease by half to around 50,000 sqm in 2025, write Knight Frank Vietnam analysts in their latest market report for Q1.

During Q1/2025, the Vietnam office market welcomed only an additional 8,400 sqm, markedly lower than the approximate 88,000 sqm in Q1/2024.

In HCMC, following a record year in 2024, net absorption of both Grade A and Grade B offices remained stable, reaching 1,300 sqm and 7,600 sqm, respectively, as of Q1/2025.

This year is expected to see more stable growth return to the HCMC office market. With over 100,000 sqm net absorption last year, total net absorption for both grades could decrease by half to around 50,000 sqm for 2025.

"Despite the decline in net absorption, with its improving infrastructure and growing reputation as a premier economic centre, HCMC is expected to continue to be a thriving and competitive office market," said Leo Nguyen, senior director, occupier strategy & solutions, Knight Frank Vietnam.

"Besides, new tenants today are more demanding when choosing office space in terms of value, location, amenities and environmental sustainability," Nguyen added.

Meanwhile, the Hanoi market continues to show signs of recovery, evidenced by an increasing number of large-scale inquiries from 1,000 to 3,000 sqm NLA (net lettable area). Total net absorption for both grades has reached 15,000 sqm.

In Q1/2025, new high-quality office buildings with green certifications and modern amenities are the key demand driver for the office market in both major cities. Owing to its fast-paced growth over the past six months, the IT/Technology sector dominated office transactions in Vietnam.

Due to the steady demand, market-wide asking rent for Grade A and Grade B offices in HCMC remained at $59.3 per sqm per month (up 1.6% year-on-year) and $33.3 per sqm per month (up 2.4% year-on-year), respectively.

In the Hanoi market, average asking rent grew slightly to $36.1 per sqm per month for Grade A and $19.5 per sqm per month for Grade B, mainly from new supply. Some landlords are offering incentives, such as longer rent-free periods, higher discounts for early birds, and furniture packages to attract new tenants.

Looking ahead to the next three years, the Hanoi office market is poised for a significant increase in new supply in both CBD and non-CBD areas, notably Tien Bo Plaza, Shilla Hotel, Gelex Tower, Pearl Tower and Landmark 55.

Meanwhile, in HCMC, several long-delayed projects are expected to resume, including Eco Smart City and One Central, which should enhance the HCMC office market landscape.

“The projected influx of new office space towards the West and Westlake area in the next three years might exert pressure on the Hanoi market’s stability. With increasing available space, it is essential for landlords to adopt more strategic leasing schemes which lower asking rents, alongside various incentives to improve office occupancy,” added Leo Nguyen.

Apartment markets in HCMC and Hanoi experiencing slow recovery

The HCMC apartment market has seen limited new supply over the past five years. The market experienced a post-Tet (Lunar New Year holiday) slowdown, with only 619 new units launched in Q1/2025. The majority (55%) came from a single affordable project in the West, while existing projects in the East and South accounted for the remaining share.

This new volume contributed to a total primary stock of more than 4,200 units, which performed modestly with an absorption rate of 16%, equivalent to 689 units sold. Despite the limited demand in general, new supply from reputable projects recorded positive sales, with 80% absorbed, while inventory moved at a slower pace, with only 11% absorbed.

Facing severe supply shortages and legal obstacles, both developers and buyers expanded their boundaries to satellite areas, seeking further investment opportunities. Meanwhile, an increasing number of buyers sought purchases in the secondary market, especially recent legally resolved projects.

Hanoi also experienced a slowdown after Tet with new supply moderate in Q1. New supply reached approximately 3,100 units, down 60% quarter-on-quarter and 27% year-on-year, with an 83% share from townships in the East and the South. This resulted in total primary stock of 4,700 units, and a medium performance returned with 56% absorbed, or around 2,650 units sold.

Due to the notably high supply last year, which now forms part of a wide range of this year’s secondary lists, new products experienced slumped sales with 73% absorbed. Inventory faced even greater challenges, with just over 30% absorbed. When primary products remained at higher prices, buyers shifted to the secondary market and surrounding provinces, seeking affordability and value, thanks to accelerating infrastructure and various product developments.

During this quarter, HCMC's primary price remained stable at $3,648 per sqm due to the market's slow performance, attributed to the lack of supply. Hanoi's primary price slowed its escalation rate to 6% quarter-on-quarter, achieving $3,083 per sqm owing to competitive secondary products surging last year and diversified products within a one-hour drive from CBD.

In the remaining quarters of 2025, approximately 5,900 new units are expected to enter the HCMC apartment market, while Hanoi is projected to receive more than 14,400 units.

In the next three years, HCMC is forecasted to welcome around 56,000 units, which is similar to Hanoi’s expected volume. Demand is projected to recover in both markets after reaching its bottom in 2023, while the selling price should rise steadily thanks to supply expanding to suburban areas, bringing more diversity and affordability.

By 2028, HCMC’s overall selling price is expected to be nearly $4,300 per sqm, while Hanoi’s is likely to reach approximately $3,500 per sqm.

"The apartment markets in both HCMC and Hanoi are experiencing a slow recovery as new supply remains limited in Q1/2025. While demand has been slow, reputable projects are still achieving positive sales, particularly in satellite areas, as buyers seek more affordable options amidst supply shortages and legal obstacles," said Son Hoang, valuation and advisory associate director, Knight Frank Vietnam.

"Looking ahead, both markets are expected to recover, driven by a new legal framework and the development of numerous infrastructure projects," he added.