HCMC to see five-fold increase in Grade A office vacancy: Knight Frank
The Ho Chi Minh City office market is likely to see a record five-fold increase in Grade A segment vacancy by this year-end, real estate services firm Knight Frank said Monday.
Knight Frank Vietnam’s Q1 2023 report shows a stable vacancy rate of 4.9% in Grade A office space in the city, similar to the 5.0% in Q4 2022. However, a more dramatic finding suggests that with over 131,000 square meters of inventory entering the market in the next 12 months, this is set to rise as high as 25% by Q1 2024.

Inside an office in Ho Chi Minh City, southern Vietnam. Photo courtesy of Knight Frank.
Noting that this level of vacancy has not been seen in the southern metropolis since 2011, Leo Nguyen, Knight Frank Vietnam’s director of occupier strategy & solutions, said that landlords had “best brace themselves” for more trying times as the sector moves entirely into a tenant’s market.
“We are going to see shifts in Grade A supply that bring clearer distinctions of the central business district, Thu Duc City, and Saigon South, especially with new supply of just under 100,000 square meters coming online very shortly in the CBD and Thu Duc City, respectively, with all offering extremely competitive asking rents.”
Knight Frank Vietnam said it is further predicting a 17.4% decrease in Grade A rentals by the end of 2025. Current rentals for Grade A space average $57.78 per m2 per month, but the firm expects this to drop to $53 per m2 per month by the end of this year, to $49.50 per m2 per month by the end of 2024, then followed by $47.50 per m2 per month.
For Grade B, the firm said Monday that the shift toward a tenant-friendly market has happened faster than most analysts expected, with Grade B office space a precursor of what the wider market can expect.
Grade B currently sits at 12.3% vacancy, up 4.4 percentage points over Q4 2022, largely led by Vietnamese enterprises, particularly affected by finance, real estate, trading and tech either consolidating floor space, returning entire buildings, or moving to secure single-use buildings of their own.
This segment is set to welcome more than 295,000 m2 of floor space to the market by 2025, nearly doubling the vacancy level to 23%. This is the highest Grade B vacancy rate the market has seen in over a decade which Knight Frank expects will stay above 10% for 12-24 months.
Grade B asking prices are currently averaging $33.69 per m2 per month. Knight Frank said it expects this to fall to $29.50 per m2 per month by the end of this year, $27.50 per m2 per month by the end of 2024, and $25.50 per m2 per month by the end of 2025. Altogether, this represents a 24.3% decrease in 27 months.
Looking toward the next few years, Leo said: “We have been predicting a shift to an occupier-favorable market for the past two quarters, and it is here now.
“No one can recall the last time that Ho Chi Minh City reported that a quarter of its Grade A and B office space was unoccupied, making this an excellent time for occupiers to speak with their brokers about future terms and rental rates,” he said.
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