Office rent down, businesses march toward central areas

The office rent in HCM City is on the decrease amid the increasing supply, which paves the way for businesses to return to the central areas after a period setting up offices in the suburbs.

Marching towards the central areas

The office rent decreases have prompted companies to leave old buildings to new building on more advantageous positions and enjoy better rents.

A market survey conducted by Colliers International has pointed out that a lot of companies, which signed contracts on leasing offices just 2-3 years ago, are considering breaking the contracts and bearing fines to move to new A and B class buildings which are better equipped.

Bitexco Financial Tower attracted two big clients in 2011, namely Adidas and Samsung. Besides the ground floor leased to use as the showroom, Adidas also has leased another entire floor at the building for the company’s office. Meanwhile, Samsung has left a building on Nguyen Du Street to the building, where it has leased three floors.

The office rent has halved from that of three years ago. An A class office can be leased at 672,000-903,000 dong per square meters (32-43 dollars), while a B class office at 294,000-672,000 dong per square meter (14-32 dollars), and C class 210,000-525,000 dong (10-25 dollars).

With 283 office buildings of different classes, the leased office market in HCM City now can provide 1.8 million square meters of floor area. According to CBRE, the newly leased area in 2011 was 150,000 square meters only, a sharp fall from 220,000 square meters in 2010.

Commenting about the market tendency, Chris Currie from CBRE said that the price decreases have made the rents more reasonable, paving the way for businesses to set up their offices in the central areas.

In order to attract more clients, investors have offered good leasing conditions, such as longer free leasing period, partial or full prop-up of the expenses on material facilities, and the removal of the provision on punishment on early leave.

Several years ago, when the office rent surged to 50 dollars per square meter in the central area, a lot of companies had to relocate their offices to the suburbs, where the office rent was just 15 dollars per square meter.

However, as the rent has gone down again–the companies, especially finance companies, are planning to return to the central areas.

The market ruled by the tenants

Considering the projects under the construction, Colliers International has predicted that the office supply would increase to 2.2 million square meters, including 720,000 square meters of A class offices at Times Squares, M&C Tower, Eden A, Vietcombank Tower and some others.

However, the market situation may be different after 2012, because a lot of investors have delayed their plan for some reasons. On Le Loi or Nguyen Hue roads, for example, one can see idle land plots, which are being used temporarily as the parking places.

According to CBRE, only two projects out of the 20 on golden land areas in HCM City have been completed, including Vincom Center. The other two, Eden A and Ben Thanh Towers are under construction, while the other 16 projects have not been kicked off yet.

With the current supply, observers believe that the market would be ruled by tenants, while the owners of the buildings would still find it difficult to get clients. They would still have to offer many preferences to attract clients.

However, Mr Currie of CBRE has said that when the supply-demand basis changes, the investors would change their strategies, and that the face of the market would change in 12 months.

Source: TBKTSG

Tags: Vietnam Property market, Vietnam property sector, vietnam real estate market