HCMC Office Market 3Q21
Attractive leasing policy pushes up demand
No new supply
Given the extension of lockdown during 3Q21 in HCMC, two Grade B office buildings, expected to be launched, had to delay the grand opening to 4Q21. The market recorded no new supply.
Attractive leasing policy pushes up demand
Net absorption of Grade A & B offices was at 3,789 m2 transactions in the quarter, mainly from the new buildings with lots of vacant space, thanks to landlords offering attractive rental concession policies. Even though the transactions were closed in 3Q21, landlords have to wait until fitting out activities allow after the lockdown period in 4Q21 before collecting rents. Tenants in the technology, real estate and finance sectors continued to lead the market.
As social distancing restricted travelling during the past three-month, vacancy rates in most buildings were generally stable, increasing by only 0.27% q-o-q. However, the fourth outbreak has greatly affected tenants’ business performance, especially in Grade B segment.
Rents remain resilient
In 3Q21, the average rent of Grade A & B offices remained at USD 30.6/m2/month, stable q-o-q and down slightly y-o-y. Rents have remained resilient in most buildings across all segments, with limited new transactions in the quarter. However, with shrinking demand, newly completed buildings are still under pressure to fill vacancies. Therefore, they continue to offer many attractive rental policies and flexible negotiation terms to attract new tenants.
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Outlook: Rent is stable despite lower demand expected
In 4Q21, only two Grade B buildings, including The Grace in District 7 and Pearl 5 in District 3, will have grand openings, adding nearly 20,000 sqm office space to the market. Grade A market will remain tight since no new additions are expected, and all existing buildings still post high occupancy rates at more than 80%.
Demand is expected to continue shirking due to the pandemic in HCMC. The early terminations, reduction in occupied areas, or relocation to tighten budget will become popular trends in 4Q21. However, this is expected to be offset by a limited new supply situation and most existing buildings recording high occupancy rates. Therefore, the rental price is expected to be stable or slightly lower, forecasted at USD 47/m2/month and USD 26/m2/month for Grade A and Grade B segments, respectively, until the end of 2021.
Note:
- Rents refer to average net rent of the Grade A and B office markets, excluding VAT and service charges.
Source: JLL Research