Office space in short supply in major hubs

March 14, 2005 | 18:33
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The cost for office space will continue to rise this year, while apartment sales should continue to be brisk, said property consultant CB Richard Ellis in a real estate forecast released last week.

High-rise: Limited office space in Ho Chi Minh City means costs will keep going up

The report said there was potential for more Grade A office developments in the next five years in Ho Chi Minh City, as all buildings of that type in the city are fully occupied.
Hanoi is also experiencing limited availability of Grade A office space. Although there are 24 new office projects under various stages of development, including the Pacific Place, the 65-storey Hanoi City Complex and Hoa Binh Towers, the capital city will still see rents increase, according to the report.
There are also a high number of large office projects on the verge of being built in the second city, but CB Richard Ellis predicted that rents would nonetheless rise because it would take time for new projects to clear investment and licensing procedures.
The average asking price to rent Grade A office space in Hanoi stands at $26 per square metre per month, while in Ho Chi Minh City it is $27.
“Occupancy costs for tenants in Hanoi and Ho Chi Minh City would increase,” said Marc Townsend, managing director of CB Richard Ellis.
He said a new trend had emerged in Hanoi in which Vietnamese companies were for the first time looking for Grade B and C office space.
The company’s statistics show that there are around 80 Vietnamese companies occupying Grade A and B office buildings in Hanoi, the majority of which are involved in trading, information technology, telecommunications, advertising, banking, tourism and insurance.
Townsend said more and more Vietnamese companies are renting space in large office buildings since this kind of property is more functional, practical, productive and efficient than storefronts or villas. However, the main reason for the trend is probably information technology, which large office space is better equipped to provide.
The consultant said Vietnamese companies had also recognised the need to move into large office buildings, which are safer, cleaner, better equipped and more prestigious than other types of properties.
“So those buildings that offer rental rates ranging from $15 to $18 will be leased up much more quickly as the rates fit Vietnamese companies,” said Townsend.
CB Richard Ellis predicts a strong sales outlook for the Grade A condominium market in Hanoi due to rising demand.
Condominium buyers are made up of both occupiers and investors, while Townsend noted that it was encouraging that many people had purchased apartments in the Ciputra project in Hanoi and Phu My Hung in Ho Chi Minh City.
The residential market in Ho Chi Minh City has shown no sign of slowing on the heels of very high supply. Newly launched projects include the Cantavil, which sells for $1,250 per square metre, and the Saigon Pearl at $1,200.
“So the market, which is still in the early stages of development, will be sustainable,” said Townsend.
In the retail segment, there will be limited supply of shopping centres in both Hanoi and Ho Chi Minh City within the next two years. However, there could be many more buildings popping up on the market in the near future.
Eight new shopping complexes are slated for construction in Hanoi, including The Garden (20,500sqm), the Cau Giay Complex (11,500sqm), Hoa Binh Tower (15,000sqm), Hanoi City Complex (1.3 hectare of land) and Ciputra Mall (130,000sqm).
The consultant said retailers, including those from overseas, were moving into larger, self-contained units in modern trade centres.
In the industrial rental market, CB Richard Ellis said it was seeing increasing demand from logistics and clean industrial companies for industrial parks in Ho Chi Minh City and surrounding areas. Most industrial parks have been fully occupied, while some of them, like Tan Binh, Amata and VSIP, are in the process of being expanded to meet growing need for space.
Demand for industrial parks in Hanoi comes mainly from automobile and motorbike assembly, information technology and telecommunication equipment manufacturers, and logistics companies.

By Ngoc Son

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