Office Buildings in HCM City: Demand Exceeds Supply
At present, most office buildings in the city are fully occupied. Meanwhile, the demand for office space in District No.1 at the heart of Ho Chi Minh City is increasingly on the rise.
It is by no means easy to lease office buildings in the centre of District No.1, Ho Chi Minh City. Most of these buildings are occupied and there is little chance of vacant rooms. Harbour View Building on Nguyen Hue Street now has only one vacant room of 14 m2 with the rental charge of US$30/m2/month as compared with the market price of US$25/m2/month. The occupancy rate at high-grade (A grade) buildings such as Sun Wah Tower, The Metropolitan, Saigon Centre, and Saigon Tower stands at 95 per cent and up to 100 per cent though the rental is US$22/m2/month. The occupancy rate in B and C-grade buildings (with lower leasing charge) is fairly high, at 80-90 per cent. Even some five-star hotels have also provided offices to lease and attract clients.
Explaining the current fever for office buildings, Mrs. Tran Thi Anh Thu - Managing director of E.Town Building - said that as many companies from other provinces flock to the city and many foreign companies set up their representative offices, the demand for offices is rising; besides, a number of companies that previously used private residence or separate houses as office are now opting for office buildings to enjoy greater convenience. Private or separate houses used as offices contain many deficiencies such as instable power maintenance systems and protection costs. Moreover, office leasors usually charge high but make out low-price invoices for tax evasion, causing trouble for enterprises' transparent accounting. Meanwhile, office buildings not only address all the above-said problems but also offer reasonable rental, favourable locations, banking and financial services that are very conducive for business transactions. To cite here an example, the monthly rental of a 70-m2 office in Sky Garden at US$20/m2/month is US$1,400 (protection, hygiene and electricity services are free of charge), still cheaper than the rental of an equivalent area at UUS$2,000 per month. According to Mrs. Minh Vy from the Business Department of Nestle (Switzerland) office based in Tuoi Tre Tower Building, businessmen highly appreciate the professionalism and security offered by office buildings. Another advantage of office buildings over private houses is the available parking area. In Melinh Point building, clients can use the office surface at their disposal; the building can provide more room for office expansion if the number of clients' employees increase. Meanwhile, it is very difficult to rent a separate surface that adapts to specific use purposes. Sometimes, you have to rent 70 m2 while you only need 50 m2. Mr. Nguyen Huu Hien, Director of Saigon Software Centre - SSP has said that the occupancy rate in SSP is always 100 per cent. Located in District No.3 and very near the city’s hub, this centre is equipped with a high-speed internet system, reliable security and high-quality business support services. Therefore, it's a favourite choice of many software companies. Similarly, E.Town Building has a modern infrastructure that meets regional and international standards and is located near the airport, so many large IT corporations have leased offices in this building.
According to Mr. Nguyen Van Trung, director of Trung Thuy Company - the investor of Lancaster Apartment and Office Building for Lease (District No.1), the demand for office lease is on the rise and has rocketed up since early 2004. A growing number of large corporations and international organizations regard Vietnam as a safe investment destination, so they choose to set up their offices here. Many of these rent from hundreds to a thousand of square meters. 30 per cent of office building renters are newly established enterprises. Notably, a number of domestic companies try to improve their image in the eyes of foreign partners by setting up their transaction offices in high-grade office buildings.
A survey on the office lease market conducted by CBRE (an American real estate consultancy and management company operating in Vietnam) suggested that the office for lease area in Ho Chi Minh City has risen from 200,000 m2 in 2000 to 294,000 m2 in 2003 and 330,000 m2 in 2004. It is estimated that by 2010, the demand for office lease will be 500,000 m2. Meanwhile, the land area to construct office buildings for lease in District No.1 is very limited and at a premium; and many projects of office building construction are at standstill. Ho Chi Minh City is examining the obstacles to outstanding office building projects to work out appropriate measures to solve this problem. Ho Chi Minh City has also launched new construction projects. The joint venture between Vietcombank, Bonday and Ben Thanh Co. Ltd are making preparations for the office building project at Me Linh construction site No.5, District 1, Ho Chi Minh City. This 35-story building will cover an area of 3,232 square meters, and the construction area will be around 77,000 square meters. Another project, namely the SJC Twin Tower, is being submitted to the Ho Chi Minh City People's Committee for approval, with Ho Chi Minh City Gold, Silver and Precious Stone Company being the investor. According to the project design, the tower will be 151 meters high; it will have 40 stories and the total floor area of 60,000 square meters; its underground floor will be reserved for car parking; the tower will be located at the junction of four roads; Le Thanh Tong, Nam Ky Khoi Nghia, Le Loi and Nguyen Trung Truc. If it’s approved, CBRE will undertake the construction work.
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