Ho Chi Minh City’s Grade A office supply hits 456,200sqm in Q3
Thanks to the launch of units in The Hallmark and The METT.
According to a JLL report, in 3Q23, Ho Chi Minh City’s Grade A office market welcomed the launch of the first two towers in Thu Thiem: The Hallmark (54,500 sqm) and The METT (30,333 sqm).
This pushed the total Grade A supply to around 456,200 sqm, an increase of 1.23 times compared with the previous quarter.
Here’s more from JLL:
Despite strong absorption rates, the completion of The Hallmark and The METT buildings has temporarily pushed the CBD’s vacancy rate to 14%, up 8.7% q-o-q. As of this reporting, the entire CBD had over 56,000 sqm of Grade A office space available for lease. Conversely, the vacancy rate in Non-CBD saw a minor decline, standing at 9.4% for this quarter with no significant changes.
Net absorption increases due to new transactions in new projects
In 3Q23, transactions for Grade A offices in Thu Thiem led the demand, thanks to proactive pre-leasing activities from two new projects. Of the 40,000 sqm absorbed in the quarter, banking and finance were the main contributors, especially those seeking green-certified buildings. Most leasing transactions were either for new establishments or relocations from Grade B buildings in District 1.
In existing Grade A buildings in District 1, net absorption reached 1,125 sqm due to some new establishments and expansions of existing tenants’ premises. Meanwhile, demand for Grade A office spaces in Non-CBD remained stable, with net absorption standing at 197 sqm.
Rents slightly decline due to policies from new projects
In CBD, the net effective rent for Grade A office space dropped to USD 46.7 per sqm, per month, down 3.9% q-o-q. This decline was mainly attributed to the two completions in Thu Thiem, which transacted with rents lower than the average CBD rate. In response, long-standing Grade A and B buildings in District 1 are revising their leasing strategies to retain tenants amid the influx of new supply.
On the other hand, the net effective rent for Grade A spaces in Non-CBD areas held steady at USD 27.1 per sqm, per month, with no significant changes over the course of the quarter.
Outlook: Grade A supply surges, adding pressure to existing buildings
The remainder of 2023 and into 2024 should see increased competition due to new developments like The Nexus in District 1 and E.Town 6 in Tan Binh. Grade A office spaces that meet international standards are set to sustain their growth, especially those adhering to green criteria that align with tenants’ sustainability goals.
Amid economic challenges, HCMC remains a magnet for MNCs, leading to a market recalibration due to new supply, and changing the landlord-tenant negotiation landscape. Unlike previous cycles, landlords face pressure to either sustain rent growth or secure tenants. To adapt, they are using strategies like building refurbishments, enhanced management and offers of extended fit-out periods.
Note: Ho Chi Minh City Office refers to Ho Chi Minh City's Grade A office market.