The office market studied includes 18 Grade A buildings and 59 Grade B buildings in Ho Chi Minh City. For retail market data, it includes projects of commercial centers, retail podiums, general department stores but does not include commercial townhouses and front-end townhouses in Ho Chi Minh City.
OFFICE MARKET
According to GSO’s survey for Manufacturing & Processing enterprises: 64% of participants reported stable or better business in Q2 compared to Q1; 73% of participants expect a stable or better business outlook in Q3. According to the survey of 10,000 local enterprises by the Research Board of Private Economy Development (Board IV) in late May: 82.3% of participants are expecting to downsize, temporarily cease, or stop doing business in 2023. Among enterprises remaining in the market, 71.2% are looking to lay off 5% of current labor, and 80.7% expect a 5% drop in revenue. Difficulties include decreases in the number of orders, Fund/capital raising, Navigating legal procedures, and Risk of criminalization in international transactions.
In Q2 2023, Waterfront Tower from District 1 has been officially introduced to the office for lease market and is ready to welcome incoming tenants, contributing about 6,000 sq.m to the HCMC market.The trend of lease surrender has been observed across the market. Within the significant lease transactions recorded in H1 2023, Real estate, IT, and Banking tenants are major contributors to surrendered space.
In H1 2023, more than 70% of significant lease transactions involve surrender and relocation. The CBD with high business concentration and highest rent is the most impacted by this trend. Meanwhile, the CBD Fringe area receives the most relocation interest for its lower rent and proximity to existing business hubs. Net absorption in H1 2023 is estimated at about -4.500 sq.m.
As the challenging economic context continues, the office market remains relatively quiet. While Grade A still maintains stability with no significant change in this quarter, occupancy in Grade B has dropped slightly by 0.9ppts QoQ. Recent supplies are still slow to be absorbed.
Although the market is leaning toward tenant-favorable, tenants are facing financial difficulties and becoming increasingly cost-conscious. This sentiment has sustained the trend of downsizing/downgrading and surrendering office space, offsetting in the latter half of 2022. Additionally, tenants also prefer renewal of their current office space if they can afford it due to the amount of cost and time investment in setting up new office space.
Two more projects are expected to come into operation in Thu Thiem area, The Hallmark and The Mett, contributing nearly 85,000m2 of new office space to the market. In the central area, The Nexus project in District 1 is completing the facades for both towers and is also expected to be completed by the end of this year. D.' Saint Raffles building in District 1 is also continuing the construction progress. Two other projects, e.Town 6 and UOA Tower II, both located in the central fringe areas, are expected to come into operation in early 2024 and 2026, respectively.
Thu Thiem NUA’s potential to be a commercial hub:
High connectivity to existing business districts (D1, Binh Thanh; Planned: D4, D7) as well as among different zones of the peninsula via road/bidge, ferries, and monorail/MRT.
Commercial and Office space accounts for 44% of the total planned floor area. Thu Thiem NUA will have at least 1 million sq.m of new office space by 2050 once all reserved office is completed. New supply in Thu Thiem NUA expected to meet higher standards of modern office space (e.g., human centric, green and sustainable, technologically-integrated)
Key expected projects: The Hallmark (54,500 sq.m), The Mett (30,322 sq.m), Empire City (86,400 sq.m), Lotte Eco Smart (188,500 sq.m)
RETAIL MARKET
For the retail market in Ho Chi Minh City, Q2 2023 continues to have no new supply. The occupancy rate continued to be stable QoQ but still lower than the same period last year. This decrease comes from the trend of renovation, along with high vacancy rates in some projects that are far from residential areas or have not been well managed. In April, the market also witnessed retailer Parkson filed for bankruptcy and officially withdrew from Vietnam.
However, Vietnam's retail market in Q2 still proved to be attractive to foreign investors. The first Maison de Bijoux store opened in April on Thi Sach Street, District 1. Watches of Switzerland store also opened at Thiso Mall, TP. Thu Duc, in May. Luxury watch brand Hublot opened two stores in June at Union Square (HCMC) and Trang Tien Plaza (Hanoi). Tory Burch's women's fashion brand is also officially present at Union Square, District 1 in May.
Not only fashion retailers but food and beverage brands are also racing to diversify experiences and target high-spending customers. Pizza Hut launched two new Pizza Hut Signature stores at AEON Mall Binh Tan and AEON Mall Tan Phu in June. WinCommerce has just launched many new business models, typically Winmart Premium, District 7, and Winmart Experience store in Hanoi. M Village brand opens two new Signature by M Village hotels in District 1. LUSH cosmetics brand also opens its first store in Vietnam in Vincom Dong Khoi.
Retail owners are very focused on designing human-friendly spaces and integrating technology into operations. The unrented spaces are equipped with a number of additional amenities to enhance the experience and comfort of customers such as lounge chairs, and children's play areas. Technology integration is gradually being popularized to improve operational efficiency and enhance customer experience such as QR code lockers at AEON Mall and FaceID face recognition lockers at Thiso Mall.
Prospects in 2023 will have two projects expected to enter the market, Hung Vuong Plaza, District 5) and Park Hills Palace, Go Vap District. In addition, a number of other projects such as Emart 2 Phan Huy Ich and Vincom Megamall Grand Park are also expected to launch at the end of 2023-2024.
