Ho Chi Minh City’s buoyant commercial real estate sector has rebounded strongly from the lockdowns and disruptions of 2021, with first quarter results heralding pre-pandemic occupancy rates and solid rent increases for investors.

According to data released today by Knight Frank Vietnam, Grade A city-wide rents increased 0.2% year on year, with 0.56% of those rises in the first quarter of 2022 alone.

The company’s Managing Director, Mr Alex Crane said: “Despite this relatively modest rise year-on-year there will be some big rewards for developers that can deliver high end office space in the next 18 to 24 months. Occupancy rates will likely stay above 90% and we expect net rents to increase by approximately 15-20% by the end of 2023, but there will be an abundance of supply coming thereafter, so we will see a quick shift from a landlord favourable to a tenant favourable market.”

Grade A city-wide offices are presently averaging $55.31, led by the CBD itself at $62.54, and with Saigon South about 48% lower at $32.78. Within Grade B, the city is currently averaging $34.03 per square meter, with the CBD coming in at $43.37 and its fringes at $33.84.

“Tenants seeking value options should look to the emerging commercial sectors of Saigon South, where Grade A office space is averaging $32.78, and Grade B $21.60. Fast emerging Thu Duc City – itself set for a revolution when the Thu Thiem areas are fully developed – currently offers Grade B office space at an average of $30.08 per meter,” said newly appointed Director of Commercial Agency, Mr. Leo Nguyen, who joined the world’s leading independent property consultancy last month and brings 15 years of Ho Chi Minh City property experience to the firm.

Bullish rents have been led primarily by scarcity in the market, with only 10% vacancy rates in Grade A and B buildings citywide. The supply limitations are expected to continue into 2023 when, according to Knight Frank, 87,480 square meters of Grade A space should enter Ho Chi Minh City. Grade B will see 136,137 square meters become available in the next two years. From 2024 onwards, an additional 388,350 square meters of A and B space are currently in planning stages, but are not likely to come online until after 2024.

“Looking further to the next supply that is anticipated in 2025 there will be a vast amount of Grade A space for lease, potentially an additional 351,480m2 which will push inventory up to almost 700,000m2 representing a 50% increase in the scale of the prime market,” Crane added.