New office supply is expected to increase significantly this year

Continuous new supply in Hanoi and Ho Chi Minh City is projected to contribute to pushing the vacancy rate of office space over 20% in the next two years, according to Cushman & Wakefield.

In a recent market report, global real estate services company Cushman & Wakefield stated that Hanoi and Ho Chi Minh City will welcome a large volume of new office supply this year. Hanoi is expected to add nearly 81,000 square meters of new supply, primarily in outlying districts. Over the next three years, the total supply in this city is expected to grow by an average of 3.5% per year.

In Ho Chi Minh City, Grade A supply is concentrated in three projects in District 1 scheduled to be launched in the 2024-2025 period, contributing nearly 120,000 square meters of premium office space to the market. Approximately 81,000 square meters of Grade A supply will also be completed in outlying areas in the next two years.

Ms. Le Hoang Lan Nhu Ngoc, Commercial Leasing Director at Cushman & Wakefield Vietnam, stated that the office supply in Ho Chi Minh City mainly comes from the new Thu Thiem urban area and District 7 due to competitive rental prices, abundant land funds, and continuously improving infrastructure.

However, the influx of new supply also contributes to pushing the office vacancy rate over 20% in the next two years. Ms. Ngoc assessed that rental demand has slowed down in Hanoi since the second half of 2023 and is expected to remain low this year. The office vacancy rate is projected to be between 25-30% and gradually decrease to over 20% by 2027.

A similar trend is observed in Ho Chi Minh City, where economic difficulties have led tenants to pay more attention to costs, affecting overall demand. The office vacancy rate in this city is expected to be over 20% in the next two years. However, absorption rates are expected to increase gradually from this year due to higher-quality new supply and improved economic conditions.

Research firm Savills also assessed that the large number of projects launched from now until 2026 could put pressure on rents, especially Grade A. The occupancy rate for Grade A and B office space in Hanoi may decrease to 80% by 2026. In Ho Chi Minh City, rental prices are expected to decrease slightly by 1% per year in the next two years. The information technology, finance, insurance, real estate, and manufacturing sectors remain the dominant tenants in these two cities.

In the context of continuous supply growth, the trend of buildings focusing on green and sustainable factors will increase. According to Cushman & Wakefield, there are 21 buildings in Ho Chi Minh City and Hanoi certified with LEED/BCA Green Mark, two globally recognized construction quality standards. This indicates that hundreds of existing buildings will face pressure to renovate to maintain competitiveness in the market.

According to Ngoc Diem