The office buildings market in Ho Chi Minh City has remained stable inthe fourth quarter with limited new supply in grades A and B in both thecentral business districts and elsewhere, according to propertyconsultant CBRE.
The Government's success in reducinginflation (and lending rates), cutting back spending, attracting foreigndirect investment and achieving reasonable GDP growth of 5.6 percenthave improved market conditions, which in turn have improved theconfidence and outlook of both established businesses and new investors.
This demand in the market combined with limited supply hashelped stabilise rents and reduce vacancy rates. In the fourth quarterrents for both grades A and B have been quite stable (0.1 percentagepoints down from the previous quarter).
In terms of vacancyrates, grade B performed slightly better than grade A as they declinedby 3 and 1.8 percentage points from a year earlier.
Netabsorption in the quarter improved significantly for both grades A and B– by 59.8 pps and 31.7 pps – which the latter continuing to performbetter than the former.
The five most active sectors werebanking, finance, insurance, drugs, manufacturing and IT/technology evenas relocation for cost reasons ceased to be a major driver.
Expansion and new leasing are expected to drive the office market nextyear given the economy is improving and Vietnam returns to the radarscreen of investors.
For small- to average-sized occupiers, themarket does still provide some viable options, but for occupiersseeking quality, international standard, and managed buildings in thecentral business districts, limited new supply will come from largescale, mixed-use projects and from those developed partly for owneroccupation.
The notable projects coming online in 2015 include Vietcombank, Viettel, and SSG .
So while construction can be seen across the central businessdistrict, the reality is that for large tenants planning an occupancysolution, the market will remain tight until the end of 2014.
As a result rent levels will remain stable at least until Q1 2015 when the next wave of supply comes online.-VNA
