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Property

CBRE: HCMC office and retail space short of supply

Released at: 14:34, 04/07/2018

CBRE: HCMC office and retail space short of supply

Photo: Hong Nhung (VET)

City's demand for office and retail space will continue to rise, according to CBRE Vietnam report.

by Khanh Chi

There was no new supply in Ho Chi Minh City’s office market in the second quarter of the year, according to CBRE’s Q2 Quarterly Report highlighting the city.

Asking rents for Grade A and B increased quarter-on-quarter and year-on-year. Grade A recorded 7 per cent quarter-on-quarter and 17 per cent year-on-year growth, driven by rapid absorption and limited supply. Similarly, asking rents for Grade B, while not increasing as much as Grade A, also showed 7.3 per cent growth year-on-year.

Net absorption over the last year saw rapid growth. Vacancy rates in both grades were below 5 per cent. Some tenants at a few Grade B office buildings relocated to other buildings with prime locations or relocated to expand, but this did not overly affect market performance.

In terms of demand, tenant profiles remained the same. Major tenants still originate from traditional sectors such as manufacturing (22 per cent), banking/finance/insurance (22 per cent) and technology/media/IT (17 per cent). In terms of tenant nationalities, Asia-Pacific maintained 61 per cent of total enquiries compared to 15 per cent coming from Europe, the Middle East and Africa (EMEA).

Looking forward, Ms. Dang Phuong Hang, Managing Director of CBRE, expects that Grade A rental will maintain its increasing trend, though at a slower rate, because of limited available supply from now until late 2019 or early 2020. Vacancy rates will also decrease slower because of Grade A’s higher rentals. Grade B is expected to see more stable and healthy performance because of its small but more constant supply from now until 2019. The market from 2018F - 2020F will still be a landlord’s market.

There was also no new supply in the city’s retail market. Market performance, which includes asking rents and vacancy rates, as a result, did not see any significant changes. The supply of retail space in the CBD area continues to be limited because there was not much progress made on the construction of most future supply and the launch dates of some were delayed until next year.

The gap between asking rents in the CBD area and non-CBD area will widen in the next two years, when many retail podiums are expected to be handed over and large-scale shopping centers will be located outside of the city center, where the population density is high and personal incomes are improving. “With limited office supply in the CBD area and the difficulty of leasing retail podiums in the non-CBD area, we expect the combination of co-working space and retail podiums will become more popular in the next two years,” Ms. Hang said.

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