Office for lease in the second half of the year 2019

According to impressive growth momentum since 2018, office rents in Ho Chi Minh City continued to increase and are forecast to have many bright spots in the second half of 2019.


By the end of the second quarter of 2019, the total office supply in Ho Chi Minh City will have reached more than 2,231,000 m2 of floor space.


Many positive signals


According to a recent report of Jones Lang Lasalle Vietnam Company (JLL), in the first half of 2019, about 67,000 new businesses were established. The average registered capital of newly established enterprises reached a new high of about 12.8 billion dongs/enterprise, increased 27.7% over the same period. In the first 6 months of 2019, there were 4,000 new businesses registered in the real estate sector, accounting for 6% of the total number of newly registered businesses.


In contrast, there were also 21,800 businesses stopped operating pending dissolution procedures. Among them, 11,000 businesses have had their business registration certificates revoked under the 2018 data standardization program to eliminate previously established businesses but in fact no longer operate.


In the second quarter of 2019 alone, there were 38,500 newly established businesses, an increase of 2.0% in the number of companies and 30.8% in registered capital compared to the same period in 2018.


Office buildings in downtown Ho Chi Minh City have high occupancy rates


Besides, the total foreign investment committed to invest in Vietnam reached nearly US $ 18.47 billion in the first 6 months of the year, equaling 90.8% over the same period last year. Specifically, there were 1,723 newly registered projects totaling US $ 7.41 billion, increased 62.8% over the same period. The disbursed FDI capital reached US $ 9.1 billion, increased nearly 8% over the same period.


Of the 19 industries that were registered for investment, processing and production, it was still the most attractive sector with foreign capital, recording US $ 13.15 billion, equivalent to 71.2% of total capital. The real estate, wholesale and retail sectors ranked second and third with USD 1.32 billion and USD 1.05 billion, respectively. Hong Kong (China) leads the way in 95 countries and territories investing in Vietnam in the first half of 2019, with a total of 5.3 billion USD, accounting for 28.7% of FDI. Followed by South Korea with 2.73 billion USD and China with 2.2 billion USD.


Facing the above signals, industry experts appreciate the prospects of the office for rent segment. This is also the segment that attracts a great deal of attention from foreign businesses investing in Vietnam's real estate market, especially when the office is attached to residential areas and industrial parks.


Nguyen Viet Quang, a securities expert, said that in the past few years, offices for lease in two big cities of Vietnam, Hanoi and Ho Chi Minh City, always had rental performance and profitability rate in the top of the world. In 2018, Hanoi was the world leader in office productivity with a market rate of 8.57%; Ho Chi Minh City ranked fourth with a market yield of 7.36% (in 2017, Ho Chi Minh City ranked second).


The excitement of the rental office segment is real, but due to its heat basically only the insiders can really feel, so the outside does not seem lively and is mentioned as much as other segments, such as residential or resort real estate, industry…


According to JLL data, the average rent for Grade A & B offices continued to increase in the second quarter of 2019, reaching US $ 28.5/sqm/month, increased 2.5% QoQ and 5.2% YoY. Grade A rents have slowed down compared to the first quarter of 2019, while Grade B rents continue to increase, reaching 3.5% QoQ, due to strong rents in the CBD.


“In the second quarter of 2019, HCMC office market welcomed 42,754 m2 of new supply from 7 new buildings. By the end of the second quarter of 2019, the total office supply in Ho Chi Minh City will have reached more than 2,231,000 m2 of floor space, including Grade A, B and C. By the end of 2019, the market is expected to welcome a large amount of supply. new, causing occupancy across the market to fall. Flexible workspaces will continue to expand in both the central and non-CBD areas” said JLL representative.


Also according to this research unit, in the short term, the market is expected to continue to receive good rental demand thanks to the positive economic background of Vietnam. However, the current unstable world economy may disrupt office demand in the market.


In addition, abundant new supply expected to enter the market in the next 3 years may put pressure on rents and rental capacity of existing supply. Accordingly, developers need to come up with flexible rental strategies to benefit from the market.


Need the right direction


According to the leaders of a number of businesses in the field of offices for lease, the increasing demand and purchasing power does not mean that all offices are full. It is not difficult to find an empty space right in the city center. Therefore, requiring office supply units to catch up with the trend and find the right direction for themselves.


Specifically, some brands such as Regus, Toong, Up, Dreamplex, CoGo... have chosen the co-working space business as their main direction when setting foot in Vietnam.


Mr. Lars Wittig, General Director of Regus Vietnam, Cambodia and Philippines said that the office leasing market, like any other market, operated on the supply and demand rule. That is, if real estate developers saw demand from the market, then they would invest to provide the right products.


“The business environment is changing everyday, not only for small and medium enterprises, but also for large enterprises and multinational corporations. Therefore, it will be difficult to predict what office demand in the next 1-2 years. That's why flexible office solutions will prevail over traditional office models” Mr. Lars Wittig said, adding that Vietnam's co-working market will continue to grow in both quantity and quantity. It will attract many customers, especially startups as well as multinational corporations that are in need of reducing operating costs, while improving productivity and flexibility.


According to Ms. Vu Thi Phuong, Director of Replus Joint Stock Company, customers of this segment are very diverse. From young businesses, newly established enterprises, small and medium enterprises, large corporations wishing to set up representative offices or branches and representatives from foreign companies to Vietnam,... should choose business types of virtual office (Virtual office), shared office (Shared office).


Because according to this leader, most startups have difficulty in business license procedures and an address to register a business. Therefore, the best solution to help them get a beautiful office location that impresses customers while still saving costs is to use virtual office services.


In addition, the virtual office service will support businesses up to the office administrative tasks such as: The front desk will replace businesses that receive mail or postage, or when customers contact, will record the information and forward it to you via maill. In addition, when receiving guests here, customers will be supported wifi, water, tea, coffee for free.


According to a report of Real Estate Investment Newspaper, in the second quarter of 2019, Replus's office space increased by over 50%. Increasingly, customers are demanding more of the associated services and 4.0 features in their workplaces, requiring more comfort and a collaborative business community model.


According to Viet Dung