Ho Chi Minh City office market
The total supply of office market by the end of 2019 reached 1,232 thousand m2, an increase of 5.5% compared to 2018. Due to the abundant real estate supply, the vacancy rate of this market increased slightly to 5.2%. However, the market is still very active with a high absorption rate.
Source: VIRAC, VNREA
Demand for office space constantly recorded positive changes, especially after the US-China trade war. This trade war has spurred foreign manufacturing and logistics companies to seek office space to move from China to Vietnam.
In 2019, the office space market in Ho Chi Minh City with the new supply was officially put into operation, mainly from Grade B offices. Despite the large supply, rents rose sharply in Ho Chi Minh City because grade B offices are located in good locations that meet the demand for rent.
By the end of 2019, Grade A office supply reached 260,500 m2 and only positioned in the center of Ho Chi Minh City with a vacancy rate of 2.36%. Grade B offices were more abundant with a total of 971,500 m2, increased by 15% compared to 2018 with the vacancy rate of 5.98%.
Source: VIRAC, VNREA
From 2020, an additional 71,000 m2 of new office space is expected to enter the market. It includes two Grade A buildings – Crescent Hub outside the city center, Friendship Tower in the center – and one Grade B building – Viettel Tower – outside the center.
Industrial park market
The supply of industrial parks in Ho Chi Minh City in 2019 remained constant compared to 2018. The total leasing area reached 2,483 hectares from 19 active industrial parks. In 2019, Ho Chi Minh City industrial park market was active due to stable supply and increased demand, pushing the vacancy rate of the whole market to 10.52%. Occupancy rates as well as rental rates are gradually improving owing to the US-China trade war.
Source: VIRAC, VNREA
Statistics in Q4/2019 show that districts in Ho Chi Minh City have a significant difference in the total supply of industrial land and vacancy rates. In urban districts such as District 2, District 12, Tan Phu District, there is a high percentage of land supply rate compared to the land fund in these districts. The amount of vacant land is trivial, with the occupancy rate up to nearly 100%. However, in some suburban districts such as Nha Be and Binh Chanh districts, the land source is more plentiful and the vacancy rate is approximately 25%.
In the future, investment to build manufacturing areas and industrial parks in these districts will also escalate for further development. However, problems posed for these suburban districts are the site clearance and compensation. Some industrial zones in Ho Chi Minh City have not been invested in synchronous technical infrastructure. That induces difficulty to attract enterprises.
Forecast of real estate development trends in Ho Chi Minh City in 2020
Shifting real estate investment to surrounding areas
It is forecast that adjacent provinces will be the main market providing the primary source of real estate in the coming years. Land fund in Ho Chi Minh City is becoming insufficient as industrial activities expand. In the circumstances of scarce supply in Ho Chi Minh City, the real estate market is shifting to the surrounding areas. The demand for housing here will increase once the number of experts and labor increases. Cities such as Binh Phuoc, Long An, Dong Nai are having plentiful new supplies, and the selling price is also more reasonable than the central areas.
In addition, the priority of traffic infrastructure elements and the policy of developing the expanded urban area to the East also make the market here become more vibrant. Ho Chi Minh City currently implements about 216 traffic infrastructure projects. Of which the Eastern infrastructure projects account for 70% of the total capital – VND 350,000 billion invested in the city transport in the 2010-2020 period.
Benefiting from free trade agreements
Under the impact of EVFTA and EVIPA, Vietnam’s real estate market in general and Ho Chi Minh City real estate, in particular, will benefit the most from industrial, office and residential real estate.
Accordingly, when these trade agreements officially come into effect in early August, it will open opportunities for goods, trade and investment for foreign businesses. Deeper participation in the supply chain in Vietnam has led businesses to relocate their offices, open branches, etc., which increase the demand for business premises. In addition, when industrial real estate develops, a wave of investors, experts, and laborers will work and live there. Thus, the office and housing segments are also expected to grow up in the future.