Leasable floor space sector-wide supply across Ho Chi Minh City saw a 16 per cent increase compared to last year, while overall occupancy and asking rents recorded a commensurate fall, data from Knight Frank Vietnam’s 2023 flex space study reveals.

According to the study, July saw the city offering a total of 95,300 sq m. of space, 12,800 sq m. more than last year, with a 2023 city-wide average occupancy of 81 per cent, down 5 per cent from the year prior.

Average asking rents for private offices within flex spaces have fallen by 34 per cent to $209 per person per month, while monthly hot-desk rates have similarly fallen by 35 per cent to $139, likely due to the increase in supply, notably in non-CBD areas, seeing operators offering lower rates to attract tenants.

Still, the 16 per cent growth in floor space reflects broad optimism in a sector that, according to leading player, The Sentry, is developing purpose-built spaces to attract and address the needs of burgeoning creative industries. This includes design, music, and video production as well as media. Its new Sentry P location in Thao Dien is furnished using recycled and sustainable materials, the facility boasts Fitwell Certification and even a robotic cocktail maker, all designed to appeal to this creative niche and augment The Sentry’s traditional strongholds of tech firms, e-commerce businesses, entrepreneurs, and startups. The Sentry and other leading brands are bucking the downwards occupancy trend in the sector, with floor space take-up typically above 90 per cent across its properties.

“A reputable brand, impressive office facilities and amenities, stylish design, and prime location are seen as the recipe for success for co-working operators,” said Mr. Leo Nguyen, Director of Occupier Strategy & Solutions at Knight Frank Vietnam. “Many companies are also looking for the flexibility to scale their businesses up or down, and co-working and serviced office operators are well positioned to offer this flexibility.”

Knight Frank’s numbers bear this out, with CBD co-working occupancy rates tracking at 79 per cent and emerging business and entrepreneurial centers such as Thu Duc city (notably Thao Dien ward) averaging even higher occupancy rates of around 87 per cent. This is significantly higher than other non-CBD districts and wards such as Phu Nhuan and Tan Binh, which are often only 40-50 per cent occupied. This reflects both an increased demand for prime locations by larger tenants, and by smaller occupiers looking to be surrounded by like-minded businesses and the support infrastructure that some of the more established operators are able to offer, particularly as new enterprise registrations declined 0.5 per cent year-on-year in the first half of 2023.

“This connection and sense of community has been key to our success at The Sentry,” said Mr. Greg Ohan, The Sentry’s CEO and Co-Pioneer. “We are very selective about who we will let in as part of our internal commitment to create spaces of like-minded people and companies. This is why we host functions in our dedicated event zones to further foster this spirit.”

“While we are hearing a lot about back-to-office decrees globally, Vietnam’s companies are broadly looking for ways in which remote or hybrid working models can be made to fit with the local environment, the country’s younger workforce, and the market dynamics,” said Mr. Leo Nguyen.

Agreeing, Mr. Ohan said Vietnam’s younger demographics don’t necessarily translate well to work-from-home and hybrid working models, despite their popularity among many Gen Z workers. The hybrid model is a little ahead of its time in Vietnam as younger team members will often need the mentorship and guidance of senior staff, and the inspiration, connection, and cooperation that an in-person work environment provides.