The high demand of Grade A office space in Ho Chi Minh City

Deutsches Haus, a modern 27-story Grade A energy-efficient office building in Ho Chi Minh City’s (HCMC) central business district (CBD) that opened in September, is already at 60% occupancy despite asking the highest rents in town.


Deutsches Haus, the site of the German Consulate among other German government institutes, is currently asking rents of US$55 per square meter per month (sqm/m), compared with the average US$45 sqm/m for similar space last year.


HCMC Grade A office space rents jumped about 12% in 2017 and now exceed other Southeast Asian capitals such as Bangkok, Jakarta, Manila and Kuala Lumpur, according to a James Lang LaSalle (JLL) regional survey conducted in mid-2017.


With a healthy inflow of foreign direct investment (FDI) last year, up to US$17.5 billion compared to 2016’s US$15.8 billion, and no new office buildings set to come on the market in the next two years, HCMC’s rentals are set to soar.


A good gauge of the market will be the asking price at Deutsches Haus, the new kid on the block. “If demand continues to grow, that US$55 per square meter per month could be US$65 psm/m by the end of the year and could be US$75 psm/m by 2019,” predicted Peter Dinning, chairman of Colliers International (Vietnam) and a 20-year veteran of the Vietnam property market.


Dinning has seen the dramatic rise and fall of HCMC office rents over the past two decades, starting in 1997 when he arrived when the average asking price for Grade A office space was US$40 psm/m. That quickly fell to US$15 psm/m in the aftermath of the 1997-98 Asian financial crisis.


“Then in 2006, at the peak of the economic boom here the rents were US$85 psm/m and then in 2008/09 they dropped again to US$25 psm/m because of the global meltdown, and now we’re back to US$45 psm/m,” he told Asia Times.


Price fluctuations add to other uncertainties property developers face in HCMC, where total supply of both Grade A and Grade B office space is about 1.2 million square meters. “For site acquisition, licensing and construction of an office building in HCMC you need a minimum of five years and then when you look at the price fluctuations its quite risky,” Dinning said.


Colliers’ estimates that another 500,000 square meters of new Grade A office space will hit the market by 2020, but no new launches are expected in 2018/2019. That’s good news for Deutsches Haus, which is the now the only Grade A office with space available; the average occupancy rate of Grade A office space is now 98% in HCMC.


Source: Asia Times



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