Falling rents mean more firms take aim at prized CBD spots

More businesses are enjoying a room with a view in the southern hub

Savills Vietnam’s director of commercial leasing Le Thi Thu Huong said: “Since the end of 2011 tenants have been excitedly moving from buildings in the city’s non-central business districts (CBD) to office buildings in the CBD or from old office buildings to new ones.”

Savills said many companies  had moved from Tan Binh district to enjoy higher quality buildings in Ho Chi Minh City’s centre. Also, many food and beverage tenants had relocated to District 1’s Vincom Center to benefit from low rents.

“Being located in the CBD with new buildings with new interior furniture and better equipment always is a top priority for enterprises to target a convenient place to trade with customers and partners,” said Huong.    

Renee Kha, associate research director at Colliers  Vietnam, said more firms were taking advantage of the buyer’s market, especially in the Grade A segment.

According to Colliers 2012 first quarter report, the average Grade A rental rate  was $36.7 per square metre per month, down 7 per cent in comparison to 2011’s first quarter. It is the lowest Grade A rate since 2006 and half the average rent of 2007.

The report also showed that along with competitive rental rates, developers have offered many promotions and incentives to attract new tenants. Bitexco Financial Tower’s rents were offered at around $44 per square metre, while Vincom Center’s office rentals were $30 per square metre, per month.

Huong said many tenants had not enlarged their offices due to the tough economy, while some real estate tenants and Japanese firms in transport and advertising had moved to lower grade buildings to decrease costs.

Besides, demand for offices significantly dropped about 51 per cent on-quarter, but the absorption of Grade C buildings had risen about 10 per cent on-quarter. The absorption of Grade A declined 70 per cent and Grade B declined 66 per cent on-quarter, according to Savills.

About 30 per cent of office buildings had dropped rents, leading  to general rents to fall 2 per cent on-quarter, equivalent to VND562,356 ($26.7) per square metre, per month. General occupancy climbed 1 per cent on-quarter with Grade B occupancy levels reaching 87 per cent, while Grades A and C reached 83 per cent, said the report.

Huong forecasted that the rents would continue falling  due to the tough economy and huge supply with around 1.4 million square metres of new office for lease from 75 projects entering the market.

The market currently has 1.2 million square metres of offices for rent. Renee Kha said that there would be strong competition among all grades and the average rental rate would continue decreasing in the next quarters.