The office vacancy rate in Ho Chi Minh City reached 18 per cent in the third quarter of 2023 and is predicted to increase to over 20 per cent in the fourth quarter, which would be a 12-year high, according to privately-owned real estate consultants Knight Frank.

In its Q3 2023 office market update, Knight Frank reported that Grade A asking rents reflected a quarterly decline of 2.2 per cent and 0.2 per cent in Grade B rents, as vacancies jumped to 18.2 per cent and 11.6 per cent, respectively. Asking rents for Grade A offices now average $57.60 per sq m per month, with cumulative available space of around 73,000 sq m.

“It should not come as too much of a shock to investors, and the new supply is very much welcomed by the market, which has not seen any new Grade A offices in Ho Chi Minh City since 2017, which really is too long for a city of its size,” said Mr. Alex Crane, Managing Director of Knight Frank Vietnam. “That said, the amount of available space today is higher than it has ever been since I began to keep records when I arrived in 2011. While vacancies back then were also 20 per cent, with downwards pressure on rents, the market was far smaller and the available Grade A space was less than half of that available today. What is far different now versus then is the quality of buildings on offer, but also the demand side, particularly from multinational companies who continue to increase their presence in Vietnam and in particular Ho Chi Minh City.”

Knight Frank noted that the downwards push on average rents in the Grade A segment is a result of new buildings in the Thu Thiem area of Thu Duc city, which are offered at a more competitive rent to traditional District 1 rents. “The development of Thu Thiem is providing high-end office space at a good discount versus the traditional CBD, and occupiers have a greater choice now of three core areas, in District 1, Thu Thiem, and District 7, for international standard offices,” he added.

Another building is due to launch in the fourth quarter of this year, adding an additional 50,000 sq m of leasable space to the market, which Knight Frank forecast would push vacancies in Grade A buildings to above 20 per cent by the end of the year. Grade B rents, meanwhile, are expected to see a 6 per cent fall in asking rents, to $32 per sq m per month.