How will office rent move?
At least three foreign property management and consulting firms in Vietnam, namely CB Richard Ellis (CBRE), Savills and Jones Lang LaSalle, have shrugged off Cushman &Wakefield's projection.
They share a view that office rent will remain firm or drop slightly rather than sharply because of high demand.
"We do not think rent will fall quite as dramatically as some are suggesting, particularly in the Grade A office sector," says Brett Ashton, managing director of Savills Vietnam.
He says there is office space available here but supply is not redundant to cause the rent to plunge as forecast by Cushman & Wakefield.
Toby Dodd, general manager of Cushman & ...view middle of the document...
Ashton says the rent will depend much on the quality and location and management of each building. However, it will take time for the rates to come down though Savills predicted Grade A rents will reach US$100 per square meter by the end of 2008.
Townsend reveals the Kumho is looking to break a number of records in the rental market.
Ashton estimates the supply of Grade A offices currently stands at 75,000 square meters in HCMC and me latest rents, based on the most recent new leases in Grade A buildings, equate to some US$97 per square meter, inclusive of service charges, but exclusive of value-added tax.
Jones Lang LaSalle Vietnam says the limited supply has led the average net rental of Grade A space to rise to a new high of US$79.3 per square meter per month at the end of the second quarter of 2008, a quarter-on-quarter increase of 26% and a year-on-year rise of 94%.
Ashton says Savills believes Grade A rents over all, including existing buildings will settle at US$65-75 per net square meter next year. Meanwhile, the Grade B office rent will stand at around 35-45 per square meter given the expected new supply coming to market and Grade C at US$20-25 per square meter.
Andrew Brown, general director of Jones Lang LaSalle Vietnam, assumes the office rent will enter a period of stabilization in this regard. "Then we expect pricing especially for premium end office space will remain at current levels and or show some further moderate levels of growth off existing levels".
High demand vs undersupply
Townsend is seeing an undersupply because there will not be too much new office space of Grade A to be put into service in the near future. "Two or three large new buildings will go online in District 1 in the next 18 months".
He demonstrates there will be 31,562 square meters at the Kumho project, 27,660 square meters at the Centec Tower and 15,600 square meters at the Sailing Tower.
According to Jones Lang LaSalle Vietnam, the central business district (CBD) expects no new stock of Grade A office building until the Kumho Asiana Plaza and Centec Tower are completed. The company furthers the current supply is generated from expired leases of tenants that vacate space to move to less expensive buildings.
Savills figures show HCMC has 510,000 square meters across all grades and locations while there is 375,000 square meters of Grade A and B space in Hanoi.
Ashton says the office market last year was the exception, not the norm for HCMC. "Over the past 10 years, HCMC has seen an average of 25,000 to 30,000 square meters of office take-up per year. Last year, the take-up was 120,000 square meter, or four times the average".
Talking about the future supply, Ashton says the Kumho and the Centec Tower will represent a rise of 73%, and more competition will occur. "This means existing buildings will have to come down somewhat from current asking prices and all Grade A buildings will have to compete more fiercely given the new buildings coming to...