The vacancy rate of offices in Ho Chi Minh City reached 18% in the third quarter of 2023, while rents decreased by 0.2 -2.2% quarterly, according to Knight Frank Vietnam, a leading real estate consultancy.
In its report on HCM City office market in the third quarter of 2023, Knight Frank Vietnam predicted that in the fourth quarter, the office vacancy rate will increase to over 20% due to new supply in Thu Thiem area in Thu Duc City, which is a 12-year high.
Specifically, in Ho Chi Minh City, rents decreased by 2.2% quarter-on-quarter for Grade A offices and 0.2% for Grade B offices, while the Grade A office vacancy rate increased to 18.2% and that in Grade B rose to 11.6%. The Grade A office segment currently has a total vacant floor area of about 73,000 sq.m and an average asking rent of 57.60 USD per sq.m per month.
Alex Crane, CEO of Knight Frank Vietnam, said that a decrease in office rental prices had already been forecast in 2022, so this is not a shock to investors. On the other hand, the new supply is welcomed by the market, because the city has not had any Grade A office building since 2017, he said, commenting that this period is too long for a large urban area like HCM City.
According to Knight Frank Vietnam, the total office floor area for rent is currently higher than in 2011.
It noted that the trend of lowering the average rent of Grade A offices is partly due to the impact of the opening of new office buildings in the Thu Thiem area, which have more attractive asking rents than the central area in District 1.
The report also showed that another office building will be in operation in the fourth quarter, providing an additional 50,000 sq.m of floor space for the Grade A office market, pushing up the vacancy rate to more than 20% by the end of this year. During the same period, Grade B office rental prices are also expected to decrease by 6%, down to 32 USD per sq.m per month, it said.