A view of Keangnam Landmark 72, the tallest building in Vietnam. (Photo: Internet)
New Grade A and B supply in HCMC will be approximately 190,000 square meters (m2) by 2017. Roughly 77% will be located in the center business district (CBD). Whilst Grade A supply is limited, opportunities arise from new Grade B buildings, according to the report.
Occupied office space is forecast to increase by 13% in 2016 and 14% in 2017 in HCMC, while the increase is forecast at 11% in 2016 and 15% in 2017 in Hanoi.
The real estate company forecast that in HCMC, Grade A and B rents will increase 4% in 2016 and 9% in 2017. Assets in prime CBD locations could experience a rent increase of up to 10%.
Several Grade A landlords are reportedly planning to increase rentals although the present A grade market gross rental runs at $46/m2/month.
In Hanoi, the average rent of Grade A and B is expected to grow 4% in 2016 and slide 3% in 2017.
“Vietnam’s GDP is expected to remain robust over the next three years and many industry sectors are poised for growth, underwriting office demand. Across 23 industry sectors, finance, insurance and banking have the strongest office demand in both domestic and foreign companies,” says the report.
The near term prospects for foreign demand look strong. Multilateral agreements such as the Trans-Pacific Partnership are expected to attract and expand existing international businesses particularly manufacturing, distribution and logistics.
Recent good GDP growth and the increase in the number of newly registered local enterprises indicate improved domestic demand. With a lag in new supply, the prospect of short term rental growth is high, the company says.
Demand for Grade A and B offices has strengthened in Vietnam's two major cities, says Savills Vietnam
In Q3/2015, the average occupancy of Grade A and B was 93%, up two percentage points year-on-year. Grade A had the best performance with at 96%, the highest in the last six years. Current HCMC supply is limited to only nine buildings. The newest Grade A projects - Saigon Center Phase 2 and Deutches House - will only enter the market in Q3/2017.
In Hanoi, the average gross rent of Grade A and B in Q3/2015 was $21/m2/month, down 0.2% year-on-year. Demand is recovering with occupancy at 81%, up 9 percentage points.