HCMC to see five-fold increase in Grade A office vacancy: Knight Frank

By Tuong Minh
Mon, March 27, 2023 | 4:00 pm GMT+7

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.

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.

Comments (0)
  • Read More
Vietnam’s inconsistent legal framework poses problems for FDI sector: Deep C exec

Vietnam’s inconsistent legal framework poses problems for FDI sector: Deep C exec

Vietnam’s legal framework lacks consistency and the foreign direct investment (FDI) sector will soon face challenges related to the Law on Environmental Protection, says Bruno Jaspaert, CEO of Deep C Industrial Zones.

Economy - Tue, November 19, 2024 | 6:30 pm GMT+7

Vietnam shares sink on extended foreign selloffs

Vietnam shares sink on extended foreign selloffs

Vietnamese equities fell for a fourth consecutive day on Tuesday as foreign traders extended their selling spree.

Finance - Tue, November 19, 2024 | 5:10 pm GMT+7

Germany’s household product firm QuickPack to invest $32 mln in Vietnam

Germany’s household product firm QuickPack to invest $32 mln in Vietnam

Germany’s QuickPack, a specialist for household goods and hygiene products, will invest €30 million ($31.8 million) in Vietnam’s Mekong Delta province of Long An.

Industries - Tue, November 19, 2024 | 4:24 pm GMT+7

Malaysian millionaire willing to invest in convicted Vietnamese tycoon’s property project: lawyers

Malaysian millionaire willing to invest in convicted Vietnamese tycoon’s property project: lawyers

Malaysian millionaire Vincent Tan has evinced investment interest in a residential project owned by convicted tycoon Truong My Lan, chairwoman of Van Thinh Phat Group, lawyers for the latter have disclosed.

Real Estate - Tue, November 19, 2024 | 4:17 pm GMT+7

‘Bottleneck of bottlenecks’ continues to dog Vietnam's property, infrastructure projects

‘Bottleneck of bottlenecks’ continues to dog Vietnam's property, infrastructure projects

Limited consultations between state agencies and the parliament’s primary focus on wording are issues with Vietnam’s legal framework adversely affecting property and infrastructure projects, say experts and corporate leaders.

Economy - Tue, November 19, 2024 | 3:40 pm GMT+7

President Xi Jinping hastens construction of 3 Vietnam-China rail routes

President Xi Jinping hastens construction of 3 Vietnam-China rail routes

Chinese President Xi Jinping has called for more substantial cooperation between China and Vietnam, including the pacier implementation of three railway routes linking the two nations.

Infrastructure - Tue, November 19, 2024 | 3:08 pm GMT+7

Vietnam developers offer deferred principal payments, interest support to boost year-end sales

Vietnam developers offer deferred principal payments, interest support to boost year-end sales

Vietnamese housing developers are offering several incentives including deferred principal payments and interest support to stimulate demand and boost liquidity as the year nears its end.

Real Estate - Tue, November 19, 2024 | 2:29 pm GMT+7

Australia's EQ Resources acquires TMG Group with Vietnam-based ferrotungsten factory

Australia's EQ Resources acquires TMG Group with Vietnam-based ferrotungsten factory

Australia-based EQ Resources Limited has acquired its fellow firm Tungsten Metals Group (TMG), which owns and operates the largest ferrotungsten (FeW) factory outside China.

Companies - Tue, November 19, 2024 | 11:00 am GMT+7

Techcom Securities becomes largest broker in Vietnam by capital base

Techcom Securities becomes largest broker in Vietnam by capital base

Techcom Securities JSC (TCBS) has become the largest securities company in Vietnam by charter capital after finishing a rights offering last week.

Finance - Tue, November 19, 2024 | 9:11 am GMT+7

Vietnam airport operator ACV looks to better exploit non-aviation service potential: exec

Vietnam airport operator ACV looks to better exploit non-aviation service potential: exec

Vietnam's airports operator ACV expects to earn $145 million from non-aviation services this year, accounting for around 18.83% of its total revenue, which is modest compared to other countries, said deputy general director Nguyen Duc Hung.

Companies - Tue, November 19, 2024 | 7:45 am GMT+7

The Investor to host seminar on removing legal bottlenecks for infrastructure, property investment

The Investor to host seminar on removing legal bottlenecks for infrastructure, property investment

A seminar themed “Removing legal bottlenecks for infrastructure and property investment” will be organized by The Investor in Hanoi on Tuesday.

Companies - Tue, November 19, 2024 | 7:00 am GMT+7

Indonesia promises Asia-Pacific investors more incentives

Indonesia promises Asia-Pacific investors more incentives

Indonesian President Prabowo Subianto recently told the press that he will create more incentives and expand special economic zones (SEZs) so as to lure investors from Asia-Pacific.

Southeast Asia - Mon, November 18, 2024 | 11:01 pm GMT+7

Indonesia, Brazil enhance aviation cooperation

Indonesia, Brazil enhance aviation cooperation

Indonesia's state-owned aircraft manufacturer, Dirgantara Indonesia (DI), and Brazilian aerospace company Embraer have signed a memorandum of understanding (MoU) to expand collaboration in the commercial aviation sector.

Southeast Asia - Mon, November 18, 2024 | 11:00 pm GMT+7

Indonesia eyes to become member of BRICS

Indonesia eyes to become member of BRICS

Indonesian President Prabowo Subianto has shown his country’s desire to become a member of the BRICS - the alliance of major emerging economies initiated by Brazil, Russia, India, China, and South Africa.

Southeast Asia - Mon, November 18, 2024 | 10:57 pm GMT+7

Former Party chief, chairman of Vinh Phuc province face disciplinary action

Former Party chief, chairman of Vinh Phuc province face disciplinary action

Vietnam’s Central Inspection Committee has proposed disciplining Pham Van Vong, former Party chief of Vinh Phuc, and Phung Quang Hung, former chairman of the northern province, for violations related to Phuc Son Group.

Politics - Mon, November 18, 2024 | 9:17 pm GMT+7

Shaping a waterway into a key shipping channel: Viconship gets dredging nod

Shaping a waterway into a key shipping channel: Viconship gets dredging nod

A major dredging project will allow safer ship navigation and increased cargo transportation capacity on the Hai Phong shipping channel, thereby enhancing competitiveness of Vinconship’s port system, says the company.

Companies - Mon, November 18, 2024 | 7:08 pm GMT+7