Office market from 2018F–2020F will still be a landlord-driven market
Q2 2018, Grade A remained 382,763 Sq.m NLA while Grade B increased 968 Sq.m NLA to 814,330 Sq.m NLA because of Viettel Complex opening more floors for outside leasing. Looking forward to 2H 2018, total new supply for Grade B will come from two decentralized projects Thaco Building in District 2 with approximately 9,600 Sq.m NLA and M Building in District 7 with 3,000 Sq.m NLA. Both buildings are owner occupied and only allowed a small portion of available area for outside leasing.
Asking Rents for Grade A and B increased q-o-q and y-o-y. Grade A achieved 7.1% q-o-q and 17.1% y-o-y growth rates which was driven by rapid absorption and limited supply. Similarly, asking rent for Grade B, while not increasing as much as Grade A, also showed a 7.3% growth rate y-o-y. Net absorption for the past year showed rapid absorption. Vacancy rate for both Grades were below 5%.
In terms of demand, traditional sectors such as Manufacturing, Banking/Finance and Services accounted for 66%, though Co-working space and Serviced Office accounted for 4% of total enquiries. In terms of tenant’s nationalities, APAC still maintained a 61% of total enquiries compared to 15% coming from EMEA.
It is expected that Grade A will maintain its increasing path, though at a slower rate, for rental rates because of limited available supply from now until late 2019–early 2020; vacancy rate will also be decreasing slower because of Grade A’s hiked up rental rate. Grade B is expected to have a more stabilized and healthy performance because of its small but more constant supply from now until 2019.
Song Chau Group (SCBI).