City office occupancy at seven-year high: Savills

File photo of old and new office buildings in HCMC - PHOTO: KIM YEN

Average occupancy climbed to 91% in the first three months of 2015, up one percentage point compared to the last quarter of 2014 and the same period last year. “This was the highest occupancy rate in seven years,” Savills said in a report on HCMC’s real estate market for Q1.

The reported showed more than 17,500 square meters of office space from one Grade B and three Grade C projects in the city’s central business districts (CBD) were put into service in the first quarter. As of the end of Q1, there was some 1.47 million square meters from 223 projects, and the total stock rose 1% quarter-on-quarter and 4% year-on-year.

Regarding office segments, according to the report, Grades B and C fared better in terms of occupancy while Grade A’s performance remained flat compared to the last quarter of 2014.

The first three months saw the total office take-up exceeding 24,100 square meters, up 46% from the previous quarter. The demand for Grade B offices made up over 70% of total leased office space this quarter.

The demand for offices in the CBD area stayed high with the total office take-up in the CBD surging 343% quarter-on-quarter and 91% year-on-year.

The company said the average office rental in the country’s economic hub was stable at VND536,000 per square meter per month (some US$25).

The company projected 24 new projects with a total of 448,000 square meters would enter the market by the end of 2016. The number includes two new Grade C projects in the CBD area expected to come online later this year, supplying about 11,000 square meters of office space.

“With large future supply in 2015, the performance of Grade A and B may be under pressure,” the report said.

Hotels under pressure

The city’s hotel sector is now under pressure as the number of international visitors to Vietnam is in decline while there were a total of 200 new rooms in January-March.

“The rooms came from a new 5-star hotel, additional stock from an existing 4-star hotel and a reopened 3-star hotel,” the report said.

As of 2015’s quarter one, the city had 99 hotels with a combined 13,100 rooms, sliding 1% quarter-on-quarter but up 4% year-on-year.

Savills Vietnam commented that HCMC’s hotels of 3- to 5-star ratings continued to have a soft performance as their average occupancy was 70%, up two percentage points quarter-on-quarter but down four percentage points year-on-year.

“All three grades incurred a year-on-year decrease in occupancy. The 4-star segment had the highest occupancy drop of six percentage points year-on-year and the 3-star and 5-star segments decreased by four percentage points year-on-year each,” the report said.

The average hotel room tariff in the city was VND1.8 million per night (some US$82), inching down 5% quarter-on-quarter and 7% year-on-year.

According to Savills Vietnam, the city welcomed over 836,300 international arrivals in the first two months of this year, increasing 7.5% on the same period last year. However, this growth was lower than the 11% in the first quarter of last year and 9% in the same period of 2013.

The city is facing rising competition from other domestic tourist destinations having international airports such as Hanoi, Danang, Nha Trang and Phu Quoc.

Competition is also heating up in the city’s hotel market as a large amount of new supply from four new 5-star projects comes online this year, raising the total stock of this segment by 22% year-on-year.

This will put direct pressure on the five-star segment and partly affect the performance of the overall market in 2015, the report said.

There were 22 hotels of three to 5-star ratings under way, supplying around 5,300 rooms for the market as of Q1. The company predicted 10 projects with more than 2,300 units to enter the market in the next three years.