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        Saigon Office Newsletter

        Monday, 05:18 Day 15/10/2018

        From the crisis over office supply in 2012-2013 due to the economic crisis, real estate market freeze in 2012-2013, so far the office market in Ho Chi Minh City and Hanoi are now There has been a shortage of new supply, driving up office rents for several consecutive quarters.

        This is because after the crisis office market 5 years ago, most new projects have stopped deploying due to excess supply. While from 2013 until now the economy has recovered, especially in the past two years, the economy has prospered, the real estate market is vibrant.

        In 9 months of 2018, GDP growth reached 6.9%, the highest increase of 9T in 8 years. The government forecasts that economic growth in 2018 will reach 6.7%. Manufacturing grew by 13% y / y and continued to be the main engine of growth for the economy. Newly established businesses grew by about 30%, especially in real estate (40%), banking and technology.

        Demand for office space in two large cities such as Ho Chi Minh City and Hanoi increased in many quarters. According to research on office rent rates of Savills, office rents are "climbing".

        HCMC office shortage of new supply, prices continue to rise

        Savills statistics show that in the third quarter of this year HCMC had only one Grade B project and one Grade C project entered the market, supplying nearly 9,000 square meters. Total supply was over 1.8 million square meters, up 1% quarter-on-quarter and 6% year on year.

        The performance of the office market continued to improve, with rents rising by 3% quarter-on-quarter and 7% year-on-year. Price growth was driven by rising rents in all grades, especially in Grade A. Average occupancy was 97%, up 1 percentage point quarter-on-quarter. Given the low vacancy rate and the shortage of new supply in the coming quarters, the segment is expected to continue to perform well.

        By 2020, the office market is estimated to receive approximately 387,000 m2.

        Quarterly office index in Ho Chi Minh City

        Office index in the CBD increased more than in the CBD due to higher rents, at 3% quarterly. In Q2 / 2018, the CBD was 99 points, up by 3 points on a quarterly basis. and 9 points per year. With lower rental growth rates, about 1% quarterly, non-core office area indexes were 101 points, up 1 point on a quarterly basis and 6 points on a yearly basis.

        The demand for office continues to increase while the supply is limited, the central office index is expected to surpass the non-CBD index in the future.

        In Q2 / 2018, total citywide office space sales were 36,100 square meters, down 39% quarter on quarter but up 42% year on year. Consumption increased mainly thanks to new projects with good rental capacity.

        Office rent in Hanoi has increased by 5.4% in the past year

        According to Savills, Hanoi's current total supply is nearly 1.7 million m², up 3.4% quarter-on-quarter and 6.7% year-on-year with a new Grade B building coming on stream. Over the past five years, supply has grown at an average annual rate of 7.2%.

        The average gross rent increased by 0.2% quarter-on-quarter and 5.4% year-on-year, while average capacity declined -0.2 percentage points on a quarterly basis and up 0.8 percentage points year-on-year. Grade A buildings in the CBD increase in rent as well as capacity, although other areas record more space. In addition, Grade B is the only segment with both rent and capacity increase.

        The CBD office index rose 0.4 points quarter-on-quarter and 3.2 points year-on-year due to a slight drop in capacity by -0.4 percentage points quarter-on-quarter. With rising rents for off-center projects, office index rose 1.6 points quarter-on-quarter and 4.9 points a year despite a -0.7 percentage point drop in capacity year-on-year.

        Q4 / 2018 will welcome six new projects offering 109,000 square meters of office space for lease, mostly in the finishing phase and concentrated in the west. In 2019, the market will have an additional supply of 145,000 m² from 17 new projects.

        Given the current tight supply, the CBD area is expected to continue to record rising rents, and two new projects will be operational in 2019. The center will offer more options to the tenants, while maintaining competition among projects in the region.

        Nhật Minh

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