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Office for lease at HCM City in downward spiral

The office for lease in HCMC market in the first half has continuously seen prices dip and by June, prices of A-level offices felt by over 50 percent, prices of B-level offices 60 percent. It is forecasted that prices of offices for lease will further go down sharply.

In June, an A-level high-rise office building in district 1 created a shock in the market when the lease price of this building fell by $30 a square metre a month from the previous price of $50 a square metre a month. In addition, clients are entitled to various incentives such as free-of-charge rental for three months and free of charge for hanging signs, parking areas and others.

Compared to the previous highest price for A-level offices of $100 a square metre a month, the above price has dropped by 70 percent within one year. However, this is only a special case. Almost all A-level offices are currently offered for lease at some $35-50 a square metre a month.

Compared to last year's common price for A-level offices of $80 a square metre a month, the current common price of $40 a square metre a month has dipped by 50 percent.

Facing up to forecasts of steep falls in office-for-lease rentals, investors of some high-rise-office buildings have taken various measures to woo clients in a bid to fill vacancies.

Among those measures, the most common is to sign lease contracts in dong (instead of the usual dollar-based contracts) for long-term leasers. Some high-rise buildings offer the whole interiors and office equipment to clients for free of charge.

B-level offices for lease have seen higher decrease in rental prices. One year ago at its peak, the average B-level office rental reached $65-70 a square metre a month, which now however has fallen back to $30 -35 a square metre a month by March, and dropped again by $5-10 a square metre by June to $30.

As for C-level offices of small scale, the average rental now hovers around $10 a square metre a month, far lower than that in 2006.

According to Sacomreal, there is an abundance of offices for lease. Many office buildings, which are not located in good positions find it hard to attract tenants. Such an assessment matches with statistics of a real estate management company that in 2009 at least 22 office-for-lease buildings with total areas of some 204,000 square metre will be launched to the market.

Statistics of another company showed that the office areas to be put into use in 2009 may climb to nearly 280,000 square meters, all-time high office areas put into use within one year.

Almost all high-rise buildings put into use in 2009 are built at the booming time of the office-for-lease market. When those buildings are put into use, rental prices of offices in HCM City are forecasted to further reduce. It is anticipated that rental prices will return to the rates of 2006. Accordingly, rental prices will fluctuate around $30 - 40 a square metre a month for A-level offices, and $25 - 30 a square metre a month for B-level offices.

Although rental prices have deeply fallen already at present, some real estate management companies said that the falls in rental price has not bottomed out yet and may have another one-third to go. Sharing the same view, some others said that rental prices in HCM City will further reduce to be close to the rental prices in Southeast Asia.

Nevertheless, some people said that rental prices will no longer reduce sharply in the upcoming time because demand for office for lease will gradually increase again, following the recovery of the economy.
28-08-2013 | Source: