CBRE: Ho Chi Minh City office market recovering

The city’s office market in the first quarter experienced strong take up in both Grade A and Grade B segments, especially in newly completed buildings and many projects in their final stages of constructions, said Greg Ohan, director for office services at CBRE.

New projects that came online commanded a higher asking rental, pushing average rentals up slightly on the fourth quarter of 2012, he added.

CBRE said it saw average Grade A and Grade B asking rents rise marginally by 2.3 percentage points quarter on quarter. After a flat 2012, this year’s first quarter saw Ho Chi Minh City office rents come out of their dip and commence a marginal rise.

“This is a trend we expect to continue until at least the fourth quarter of 2013 until the next wave of new supply,” said Ohan.

Net absorption rates rose from more than 17,000 square metres in the fourth quarter of 2012 to almost 32,000 square metres in this year’s first quarter, according to CBRE’s key buildings tracker.

New Grade A buildings in District 1 which were completed in the first quarter such as Empress Tower and President Place have secured occupancy rates of over 50 per cent upon completion. Even new Grade A buildings in the final stages of construction in District 1 such as Lim Tower and Times Square have over 60 per cent and 50 per cent commitment respectively prior to formal completion, according to CBRE.

The firm also saw a similar strong commitment trend in Grade B buildings from fringe areas, Ohan said. Buildings such as Blue Sky Office Tower at Saigon Airport Plaza in Tan Binh District and Pico Saigon Plaza each had over 50 per cent in principle commitments prior to formal completion.

Ohan remarked that much of the demand in the first quarter was driven by existing occupier expansions, while the number of new setups or FDI driven office take up did not rise. Pharmaceutical, oil and gas, education, legal, local banks and product sourcing companies lead as the drivers for the first quarter demand, added Ohan.

The combination of occupiers seeking consolidation and cost containment, with limited large floor plate availability in District 1, has led to a rising demand for new developments in non-core District 1 locations.

Ohan said there was no major new supply expected to come online within the next 4-5 months. Tightening supply and steady demand was expected to keep asking rents stable and rising marginally.