APPD Market Report Article

Ho Chi Minh City

May 31, 2022

-0.5%

USD 47.6

Growth
Slowing

Weak demand clouds the market

  • Under the influence of the pandemic, 5 out of 13 Grade A buildings saw negative net absorption as tenants terminated leases early, reduced occupied areas, or relocated to lower rent locations. In 1Q22, the market was gloomy, with net absorption of -1,300 sqm.
  • Some buildings had positive gross leasing volume, although only on a small scale (200-300 sqm). The most notable deal is a 617 sqm lease on level 13 of Diamond Plaza from DHA Golf tenant – a local, indoor golf simulator brand.

Vacant space remains restricted

  • The market recorded no new supply for either Grade A or B buildings. One Grade B building in a Prime location completed renovation, but the handover had not reached Grade A standards as expected, and thus, was not added to Grade A basket.
  • In 1Q22, the vacancy rate in the Grade A market remained low at 7.1%. There is only 20,800 sqm Grade A space available on the market. Just a few buildings can provide more than 1,000 sqm NLA of contiguous area.

The first sale transaction recorded in Thu Thiem NUA

  • Despite the increase in vacant space, landlords are keen on maintaining rents in order to maintain the building’s capital value. The new building, on the other hand, tends to attract tenants with a more extensive incentive scheme.
  • Thu Thiem NUA became active with a new transaction recorded, a positive result of the soon-to-be-completed Thu Thiem 2 Bridge. In 1Q22, Evergreen Marine Corp (Taiwan) Ltd purchased the entire 4th floor (2,400 sqm) in the podium of Crest Residence Tower in Thu Thiem NUA, for USD 6,000 per sqm GFA.

Outlook: Landlords continue to be prudent in their leasing strategies

  • Three Grade B buildings are expected to be completed and bring nearly 70,000 sqm NLA in 2022. The Techcombank building, the sixth Grade A office building in HCMC, is expected to be put into operation by end of this year. However, because the project was mostly for internal usage, it had no significant impact on the market’s rental basket in 2022.
  • Demand is likely to gradually recover following COVID-19, with the technology and manufacturing industries driving the recovery. However, landlords remain cautious in their leasing strategies due to the large supply expected in 2023-24. By the end of 2022, the rental rate is predicted to be the same as the previous quarter, at USD 47.7 sqm per month.

Note: Ho Chi Minh City Office refers to Ho Chi Minh City's Grade A office market.

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