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Thu Duc City’s office rent market emerges and is set up for a supply take-off

11/01/2021

Thu Duc City’s office rent market emerges and is set up for a supply take-off

Sofic Tower: New TDC office leased by Cushman & Wakefield to Ikea and Connell Bros. 

 

Cushman & Wakefield, one of the world’s largest real estate consultancies, note in their Q4 2020 market update the rise of Thu Duc City’s office market after the resolution to merge Thu Duc City with eastern Districts 2 and 9.

Alex Crane, Managing Director of Cushman & Wakefield Vietnam, stated: “The emergence of the new city will set new borders for the appraisal and assessment of the commercial markets. In doing so, we can identify new trends in this very important, new economic center. Thu Duc City’s GDP will be larger than Binh Duong and Dong Nai, and Thu Duc City will become the launching-off point for many businesses in these two powerful manufacturing provinces. In isolation, Thu Duc City is an important innovation and education area that will lead to high-tech jobs, while at the same time raising a flag to investors as a center for investment into critical sectors.”

Based in Ho Chi Minh City, Cushman & Wakefield noted that Thu Duc City currently contributes only 2% of office inventory to the office market between the two hubs, with 26,000m2 of space over a handful of buildings. Within 5 years, Cushman & Wakefield forecast that an additional 390,000m2 of A & B quality office space is penned for the city, with the majority in the new Thu Thiem urban area. 

Thu Duc City’s office rent market emerges and is set up for a supply take-off

With major infrastructure projects inbound including the Thu Thiem 2 bridge, the expansion of the Hanoi Highway, and the metro station, Crane states that the draw to the east will increase in pace.  “This is noted in the performance in office rents. If we look at the historic data of the new Thu Thiem City, office rents have risen faster than Ho Chi Minh City at an average of 9% per year versus 5% in HCMC. Going forward, the burst of new supply, particularly in Thu Thiem, will draw occupiers and create competition in pricing which will pressure it slightly in the first couple of years. Equally, as the market pushes further east, prices will naturally soften. Therefore, we expect 5 years before Thu Duc’s natural rent market finds its own rhythm. There will be some slightly tumultuous rent patterns emerging as the city’s inner locations find the right balance based around the infrastructure, but as with the post-Covid world, the future looks brightest in the east.”

According to Cushman & Wakefield, average rents in Thu Duc City are approximately VND 700,000/m2 per month compared to HCMC’s VND 920,000/m2 per month.

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