City office market saturated - City office market saturated - Website Ho Chi Minh City
Though no new Grade-A office buildings are forecast to come online this year, many Grade-B buildings are expected to enter the HCM City market, according to a report released yesterday from the commercial real estate services company Cushman and Wakefield.
The office market will continue to face an oversupply over the new year due to a significant number of office projects currently in the fitting-out stage, especially in the western part of the city.
Therefore, rental declines are expected to continue and will be of considerable concern for landlords. Tenants can look forward to more flexible leasing terms in addition to falling rents.
There is expected to be around 715,000 sq.m. of office space across all grades coming onto the market in the next two years, opening up more opportunities for tenants to choose better office space at reasonable rental rates.
The fourth quarter of 2014 witnessed the market entry of one Grade-B office complex project, which raised the total supply to 1,123,800sq.m, representing an increase of 0.9 per cent quarter-on-quarter.
The average asking rent for a Grade-A office building was a very slight decrease of 0.3 per cent over the quarter, reaching US$30.4 per sq.m per month, while Grade-B buildings saw a higher decrease of 1.3 per cent quarter-on-quarter from $18.6 to $18.4 per sq.m per month.
Transactions are expected to be busy in the residential market, helping to thaw out the frozen property market. For instance, Sacomreal has launched a Dau tu an toan-co hoi vang sinh loi (Safe investment-Golden opportunity to Earn Profit) programme for buyers.
Under the programme, Sacomreal commits to re-buy customers' products with an increase of at least 20 per cent value when they buy land in the Jamona City project in District 7 and land in the Arista Villa project in Thu Duc District.
More than 100 land lots in the 106,000 sq.m Jamona City project and 90 land lots in the 9-ha Arista Villas project have been sold to customers. Affordable apartments sized from 40-70sq.m. in the price range of VND15-18 million ($714-857) per sq.m should continue to be the most sought-after and this market sector is expected to be the most active going forward.
Notably, there is no future supply located in the city centre due to a limited supply of development sites. Permission to build residential property is also difficult to obtain.
Therefore, future supply will be in non-CDB areas that offer easy access to the city centre, such as District 7, District 2, District 4 and Binh Thanh District.
Projects located along the first metro line will attract more buyers and investors.
Some suburban districts, such as Districts 8, 9, 12 and Binh Tan, with an abundant stock of affordable apartments, sufficient land fund for project developments and upgraded infrastructure are also attracting developers and low-income earners.
The New Housing Law that will take effect in July, which allows foreigners to own commercial property in Viet Nam, will help strengthen demand, especially for mid- to high-end projects.
By 2020, over a million square metres of new retail space will enter the market, a 200 per cent increase in retail supply compared to this year.
Demand for retail space in the CBD is expected to remain high in the short to medium term.
However, due to limited land, the majority of future stock will move towards the non-CBD area at a larger scale, mostly in the southern and eastern areas of the city where most of the city's infrastructure and residential developments have been established.