Colliers International Vietnam HCMC Market Insights Q22015 - Office Sector

1. SUPPLY
In Q2 2015 the office market welcomed one new Grade A building in the
review quarter, the Vietcombank Tower, supplying approximately 55,000
sqm (GFA) of office space, whilst there were no new Grade B and Grade
C buildings.
PERFORMANCE
Q2 2015 has seen positive correction in the office market since the
beginning of the year. Affirmative net absorption and increase in occupancy
rate were observed in both Grade A and Grade B segments.
In terms of occupancy, the office market remained stable in both the CBD
and decentralised districts. The average occupancy in the review quarter
was 90%, slightly up 1ppt q-o-q and y-o-y. Due to limited supply, Grade
A showed a slower level of improvement, in comparison with Grade B
and C experienced an increase in occupancy through landlords offering
competitive rents and incentive packages.
In terms of rent, landlords softened their rents slightly this quarter with
an effort to fill up vacant office space. Grade A and Grade B rental rates
saw small changes q-o-q, with a decrease of 2% in Grade A and a minor
increase of 0.3% in Grade B. Most Grade B buildings managed to uphold
their rent to slightly increase, particularly in some new and high quality
buildings.
DEMAND
Due to the improving business environment and the economic conditions,
demand for office space remained high, mainly for the purposes of
expansion and relocation of enterprises. Strongest interest was indicated
from international occupiers in the high-end office buildings with most
popular office space of less than 400 sqm in GFA.
OFFICE SECTOR
Q2 2015 | MARKET INSIGHTS
HO CHI MINH CITY
DAVID JACKSON
General Director
david.jackson@colliers.com
PLEASE CONTACT US FOR ANY INFORMATION
Figure 1: Supply by district
TRAN NGUYEN
Business Development Manager
tran.nguyen@colliers.com
ECONOMIC OVERVIEW
Vietnam has experienced a positive sign of the economic recovery in
1H 2015 when GDP grew 6.28% y-o-y, which is the highest level in the
last 10 years. The consumer confidence index also witnessed significant
improvement when reaching 143.1 points, up 10 ppts y-o-y compared to
the average target of last year.
Total disbursement rate in the foreign funded projects grew by 9.6%
y-o-y to US$6.3 billion. In which, real estate sector continued to attract
lucrative foreign direct investments with 13% of total new FDI, placed at
second after manufacturing.
In parallel with the new legal amendment of the Vietnam Housing Law
came into effect in July 1st 2015 allowing foreigners to legally own, sell and
transfer their properties will boost confidence in property investments.
www.colliers.com/vietnam
Grade A Grade B Grade C Total
Total Supply (Project) 11 57 275 343
Total Supply ( NLA) 254,550 700,450 743,900 1,698,900
Average Rent Rate
(US$/sqm/month)
40.2 19.6 11.7
Q-o-q Change (%) -2 0.3
Occupancy (%) 91 92 88
Q-o-q Change (ppts) 0.2 0.3
Table 1: Market Snapshot
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©2015 Colliers International Research
Figure 2: Market Performance by Grade
51%
12%
7%
10%
6%
14%
District 1
District 3
District 7
Tan Binh
Phu Nhuan
Other
Source: Colliers International Research
*US$/sqm/month on net leasable area, excluding service charge and VAT.
0
10
20
30
40
50
0
20
40
60
80
100
Grade A Grade B Grade C
Occupancy (%) Average asking rent (US$/m²/month)
US$/m2/mth
%
Source: Colliers International Research
OUTLOOK
Approximately 150,000sqm of future office supply in three grades
is under construction and expected to come online by the end of
2015.
This year, rents in reputable buildings are expected to remain
stable or slightly increase. Newly completed buildings, on the other
hand, will need to offer competitive rental rates in order to attract
occupiers.