Ho Chi Minh City Offices 2H/2023

ECONOMIC OVERVIEW

Ho Chi Minh City’s GRDP of 4.6% YoY in 9M/2023 was higher than the national level of 4.2% YoY. Services represented the greatest share of GRDP at 65% and the greatest growth of 5.7% YoY. All service sectors grew, except for real estate with a decline of 9% YoY. Accommodation and F&B posted impressive growth of 14.9% YoY, followed by distribution at 8% YoY.

Despite the sound economic recovery, total FDI to HCMC declined by 34% YoY to US$1.9 billion in 9M/2023, primarily affected by decreases in additional and M&A FDI. The city’s limited prime office space compared to regional counterparts has resulted in sustained high occupancy.

OUTSTANDING PERFORMANCE

With a muted historical cycle, HCMC has performed well at an occupancy of 90%; average rents rose by 6% YoY to US$32 per sq m per month. Occupancy of new projects such as The Hallmark and The METT in Thu Thiem NUA reached 50%, with rent averaging VND1.3 million per sq m per month. Thu Thiem is next to the existing CBD and the high-end offices appeal to finance, banking, insurance, and real estate (FIRE) and information, communication, and technology (ICT) tenants. Notable tenants were from Australia, Korea, Taiwan, Malaysia, and Viet Nam.

The notable pipeline of high-end supply is likely to hasten obsolescence in poorer quality Grade C assets. As of Q3/2023, stock increased by 4% YoY to 2.6 million sq m NLA from 371 projects. Grade C remained the largest supplier with a 42% share, followed by Grade B at 41% and Grade A (including Grade A Suburban) at a 17% share.