At the dialogue between the guests of EuroCham in Vietnam and domestic and foreign businesses in HCM City yesterday, Brett Ashton managing director of Savills Vietnam real estate service provider said that the most difficult period of office buildings for lease is to be over soon as it is showing good recovery signals.
He had a talk with Saigon Economic Times Online after the event. Excerpts:
Why did you say that the most difficult period of office buildings for lease is to be over while factually, many hardships now still exist?
Few months ago, the rental of offices Grade B plunged by over 50 percent from the peak of $60 per sqm a month in March 2008 to $23 while that of offices Grade A declined from nearly $100 to $50 per sqm a month.
However, recently the rental is decreasing more slowly and closer to bottom. The fact showed that the volume of rented offices Grade A in Kumho building in HCM City starts to surge and renting prices are also sustainable.
Should office investors expect a brighter movement in the real estate market?
Now the investors of office buildings Grade A and B could see that office rentals are gradually reaching bottom.
However, Savills forecasts that Grade C office rental will continue falling by about $12-15 per sqm a month because in the coming time, many companies will shift to rent offices Grade B instead Grade C to upgrade working quality.
In my opinion, Grade A office rental will start to surge again from early 20111 and will continue rising gradually in following years. Grade B offices will take longer time to recovery but still be sustainable at $18-23 per sqm a month because of the surplus of the office supply in next years.
But, Vietnam’s Grade A office rental is still higher than Bangkok’s and prices of all kinds of offices in Vietnam are more expensive compared with some regional countries.
Between 2006 and 2007, companies rented most offices but the situation changed in 2008 when more and more office buildings were put into operation whereby renters had more options. The competition in the offices for lease and the global economic downturn led to a reduction in office demand and pulled down the office rental.
Lately, specialists have forecast that Vietnam’s real estate market will restore in 2010-2011. What do you think?
Actually, the housing segment is increasing again in Hanoi and Da Nang because of the limited supply. In HCM City, office supply still surpasses demand but the investors can earn high profit if their office buildings are in good location and have suitable prices.
Nowadays, buyers are more intelligent and have more options. In the current context, prestige and design of housing products are very important, which differs from 2007 when buyers competed to purchase all marketed products.
Buyers now have chance to view the completed projects before deciding to buy houses.
* According to Savills, there are six Grade A office buildings and 31 Grade B office buildings in HCM City with total area of 475,000 sqm The figure is predicted to double in next three years.
Brett Ashton said that Kumho Asiana Plaza with total area of 25,700 sqm is the latest Grade A building opened in HCM City and there will not be such a kind of office buildings being inaugurated in the city in next two years.
