Why is office rent attractive, but many offices in the central business district of Ho Chi Minh City are still vacant?
Ho Chi Minh City is a major economic center in Vietnam, and office rents in the city center are considered relatively attractive, drawing in many global corporations and businesses. However, despite being perceived as a location with affordable office space in the Asian region, the central business district of Ho Chi Minh City still has many vacant office spaces, while many domestic businesses struggle to find suitable offices. Let’s explore the reasons behind this phenomenon in the following article.
1. The current situation of office rents in the central business district (CBD)of Ho Chi Minh City
In recent years, Ho Chi Minh City, the economic and commercial hub of Vietnam, has become an attractive destination for businesses and organizations looking to rent offices. As one of the rapidly developing cities in Southeast Asia, Ho Chi Minh City has emerged as a vital economic center, attracting both domestic and international businesses.
One of the most significant attractions for businesses is the office rent prices in the CBD of Ho Chi Minh City. Compared to many other markets in the Asian region, office rents here are genuinely appealing. According to data from JLL Vietnam, the rent for Grade A and A+ offices in the city center can reach approximately $80-90 per square meter per month.
When comparing this to prices in Singapore, another economic center in the Asian region, where office rents can go up to $145 per square meter per month, the rents in Ho Chi Minh City remain at a competitive level, even falling into the category of affordable office rents in Asia. This cost appeal has made Ho Chi Minh City an ideal destination for many businesses looking to seize opportunities for business expansion.
Although it can be considered an area with cheap office space for rent in Asia, Ho Chi Minh City Center still has a lot of empty office space
In the Savills report, it is noted that in the second quarter of 2023, office rental prices in Ho Chi Minh City experienced a decrease, while in some other cities like Sydney and Seoul, office rental prices saw growth. This could be seen as an indication of market fluctuations in the office real estate sector in Ho Chi Minh City.
Read more: What makes the rental price of Grade A quality offices outside the city center special?
2. Why is this happening?
Why are office rental prices attractive, yet many offices in the CBD of Ho Chi Minh City remain vacant? This question raises several factors and aspects that need to be examined to gain a comprehensive understanding of this situation.
Office rental prices in the central area are still considered high for many domestic businesses. While these rental prices may be attractive for multinational or foreign companies with strong resources, for Vietnamese businesses, especially newly established or small enterprises, paying a large amount to rent an office in the city center can be burdensome. Therefore, many businesses prioritize other factors when looking for rental offices, often preferring suburban areas with more reasonable prices.
One crucial factor is the unstable economic situation in recent years. Financial and economic fluctuations can cause many businesses to face financial difficulties. Many businesses have had to close or scale down their operations, leading to a reduction in demand for office rentals. Additionally, some companies have decided to relocate to suburban areas or completely change their working models to save costs, rather than continuing to rent offices in the CBD of Ho Chi Minh City.
Specifically, according to data from the General Statistics Office as of September 2023, compared to the same period last year, there were 75.8 thousand temporarily suspended businesses, an increase of 21.2%; 46.1 thousand businesses temporarily suspended waiting for dissolution, an increase of 26.9%; and 13.2 thousand businesses dissolved. The economic downturn has significantly affected the office market.
Many businesses have ceased operations or dissolved in 2023
Furthermore, the oversupply of office spaces also contributes to the phenomenon of vacant offices in the CBD of Ho Chi Minh City. In recent years, there has been a continuous increase in the supply of office spaces, while the demand for office rentals has not grown at a similar pace. This disparity has led to a widespread situation of vacant offices, and office owners have had to fiercely compete to attract customers.
Another perspective on this situation is that many businesses, especially emerging companies and technology firms, tend to choose offices in suburban areas. They opt for offices located in outlying areas to save on operational costs. This is particularly true in the context of rapid advancements in information technology and communication, enabling remote work and management more easily.
In summary, the situation of attractive office rental prices but still vacant offices in the CBD of Ho Chi Minh City is a result of a combination of factors, including an unstable economic situation, high rental prices for domestic businesses, office oversupply, and the trend of choosing offices outside the city center to save costs. Finding solutions to promote innovation and development in the office real estate sector poses a challenge for the industry and investors in the near future.
Read more: Office building with large floor area and strong appeal in the current market
3. Office Solutions for Businesses Today
Given the situation of office rental prices in the CBD of Ho Chi Minh City and the prevalence of vacant offices, businesses need to explore flexible solutions to save costs with minimal impact on their operations and sustainability. Here are some solutions that businesses may consider:
Choose offices outside the city center
For many businesses, seeking affordable office spaces outside the CBD can be a reasonable solution. This not only helps reduce the cost of renting premises but also provides favorable conditions for employees with easy transportation and a comfortable working environment.
Several new office projects are being developed in suburban areas, such as the OneHub Saigon project in the High-Tech Park of Ho Chi Minh City. These office projects offer convenient locations, and significantly lower rental prices compared to the central area, even though they provide Grade A office quality. Other advantages of such projects include convenient connectivity, a comfortable working environment, modern amenities with a campus-style office, energy-saving features built to green office standards, and a focus on sustainable development.
Office for lease in Thu Duc with Grade A quality, but the price is much more reasonable compared to the central area of HCMC
Work Model Transformation
As technology enables effective remote work, many businesses have shifted their work models. This helps save operational costs and allows employees to work flexibly from anywhere with an internet connection. However, it’s essential to have a management system in place and ensure the safety of information for remote work.
A safer solution is the hybrid working model with fewer days in the office and predominantly remote work. Businesses can choose an affordable office space for rent to maintain the cohesion and stability of team members alongside remote work. For example, OneHub Saigon is a high-quality, cost-effective project with good transportation connectivity for days when company personnel need to commute to the office.
Shared Office Rentals (Coworking Spaces)
The shared office rental model is becoming increasingly popular with many options available in Ho Chi Minh City. Businesses can rent workspace at coworking spaces, which are affordable office rental options where multiple companies operate in a shared space, saving costs and utilizing workspace. However, this option is suitable primarily for startups and small-scale businesses due to limitations in space, which can sometimes disrupt and slow down business activities when multiple companies share common meeting, working, dining spaces, etc.
Coworking space is also a cheap office space rental solution for start-up businesses
In the context of attractive office rental prices but still facing vacant offices in downtown Ho Chi Minh City, businesses need to carefully consider and choose solutions that align with their needs and financial capacities. Resource management and ensuring operational efficiency are crucial to maintaining competitiveness and thriving in this increasingly challenging business environment.
4. Conclusion
While office rental prices in the CBD of Ho Chi Minh City are appealing to large corporations, they pose difficulties for domestic businesses, especially newly established or small-scale enterprises. Alongside various factors such as economic instability and business downsizing, an oversupply of office spaces surpassing demand has led to the current situation of vacant offices in many office buildings in downtown Ho Chi Minh City.
Medium-sized and small businesses, as well as startups, are actively seeking affordable office spaces outside the city center or adjusting their work models to save operational costs. Affordable office space projects like OneHub Saigon in the East Saigon area are emerging as a solution that many businesses are exploring.
