Office rents head further north in southern hub

A continuing shortage of office space in downtown Ho Chi Minh City has pushed rents even higher, forcing tenants to choose between putting up with cramped conditions or moving out of the city center.

The average monthly rent in grade-A buildings, including Sunwah and Metropolitan, has soared to more than US$80 per square meter, including service charges and value-added tax.

When rents were $75 a square meter two months ago, HCMC ranked 13th out of 203 locations in 58 countries in terms of office rents, according to a report by global property services firm Cushman & Wakefield.

Tenants of many grade-B and grade-C office building have also suffered from the wave of rent hikes.

A company in the Pasteur Tower building, for example, now has to pay a monthly rent of $45 per square meter, an increase of 50 percent from several months ago.

Despite the hikes, growing demand and tight supply has kept most office buildings fully tenanted.

As a result, many expanding companies have started to make use of every inch of office space they have instead of renting more.

A multinational company representative said he had planned to expand his office in a grade-A building.

However, the plan was ditched when he found out the monthly rent would be $80 per square meter.

The company instead had to “rearrange the room to fit in more desks,” he said.
Dang Phuong Hang, General Manager of Cushman & Wakefield Vietnam, said the trend was becoming common among foreign companies in HCMC.

“Many of our company’s clients have opted not to rent more space but to rearrange their current offices,” Hang said.

Many companies have moved at the end of their rent contracts, heading for newly-developed areas in the city.

“Only big multinational companies must rent downtown grade-A offices to promote their brands,” Hang said.

A market analyst told Thanh Nien he expected the increase in rent rates would ease later this year when more office buildings come on line.

According to CB Richard Ellis Vietnam (CBRE), a real estate services company, the construction of about 40 office buildings will be completed this year, supplying an extra 262,000 square meters to the market.