After two years of quick price drop, the office-for-lease market is now showing some optimistic signs. The rental price has almost seen no decrease over the last three months and the occupancy rate has increased.

However, according to real estate management companies, the office-for-lease market has not been able to recover soon and there remain various difficulties ahead.

The Gemadept building in Le Thanh Ton street, district 1, HCM City that is an A-level office building was put into use in early 2009, the hard time of the market. The rental price of that building was around $50/m2/month.

Compared with the rental price of A-level-offices of a building in Le Duan street, district 1, HCM City at the peak time, $100/m2/month, the rental price of the same kind of offices after two years fell to 50 percent.

It can be said that the rental price of the Gemadept building is the new price level of A-level offices. In recent years, HCM City has had less new A-level offices. In addition, the occupancy rate of A-level offices is always over 95 percent. Although the office-for-lease market has seen strong changes, A-level-office segment has not been impacted much. By the third quarter of 2009, the average A-level office rental price in HCM City still reached $63/m2/month (service charge is included).

As for B-level offices, the rental price fluctuates around $30-35/m2/month. Although the rental price has sharply reduced, the non-occupancy rate of B-level offices is relatively high, up to 60 percent in some places.

Regarding C-level offices, the lowest rental price is $12/m2/month. Many C-level offices in Tan Binh, Phu Nhuan districts nearby Tan Son Nhat airport offer the rental price of some $15 to $19/m2/month accompanied with some conditions and many promotions.

According to real estate management companies, Vietnam’s office rental prices are still 10-20 percent higher than that in Southeast Asia. In the coming time, the rental prices of A and B-level offices may strongly drop. C-level offices still may further reduce because of high increase in supply.

Notably, when the office-for-lease market is changing in a positive manner, the occupancy rate is also slightly rising. Savills Co said that “the average rental price for all districts and levels did not change in the third quarter of 2009 and the average occupancy rate slightly inched up by 2 percent.”

Regarding A-level offices, Kumho Asiana Plaza building that was put into use at the end of the third quarter launched supply of 25,700m2 of floor areas, boosting the supply of A-level office by 5 percent. Putting Kumho Asiana Plaza into operation dragged the occupancy rate of A-level offices down by 15 percent to 81 percent from 96 percent. As for all three levels of offices, the non-occupancy rate is less than 20 percent. Namely, the non-occupancy rate is 19 percent for A-level offices, 14 percent for B-level offices and 16 percent for C-level offices.

Speaking about demand, Savills said that “demand has significantly changed but with a positive sign. In the third quarter, demand slightly reduced and such a trend would continue in the fourth quarter.”

Although there are optimistic signs from the office-for-lease market, in general and long term, lessees that has increased over the last time are not new lessees in the market but existing lessees who take advantage of cheap rental prices to move their offices from suburb areas to the central area or upgrade their offices.

Given the market prospects, Savills said that in some next years, total office areas to be put into use may reach one million square metres. Thus, it can be seen that supply of office is still rising, which will create high pressure on output. The current low price level would hardly change in the upcoming time.