Thu Thiem is a rising office investment destination – and a “viable alternative” to the existing CBD in Ho Chi Minh City (HCMC), says JLL. “There is lack of supply and increasing rents in the existing CBD, and the completion of major infrastructure within Thu Thiem,” notes Greg Ohan, director of solutions development at JLL Vietnam. “As such, we believe large head office requirements will start to look at Thu Thiem.”
According to JLL, both mature and new buildings in Grade A & Grade B office submarkets are seeing an average occupancy rates of more than 94% as at 3Q2017. “While there’s rising demand, there’s also land scarcity,” says Ohan. This means a landlord’s market, where landlords have been “confidently raising rental rates”, he notes.
Average monthly rents in the Grade A sub-market within HCMC now stand at US$3.61 ($4.88) psf, while average Grade B monthly rents – which have been rising y-o-y since end-2013, says JLL – have come in at about US$2.07 psf.
Besides rental rates, another indicator of the strong demand for office space in HCMC is average tenant size, says Trang Bui, head of markets at JLL Vietnam. “The average tenant size in HCMC (for transactions brokered by JLL) has doubled y-o-y since 2016, to 500 to 600 sq m on average,” she says.
Ohan cites co-working, logistics, sourcing and manufacturing-related enterprises as the driving force behind rapid absorption rates of office space in HCMC. “We believe this is a trend that will continue through 2018 to 2019”, he says.
The solution to the supply and demand mismatch? According to JLL, that would be the 657-ha Thu Thiem New Urban Area, located along the banks of the Saigon River opposite the existing CBD. When completed, the up-and-coming area in District 2 of HCMC will boast about 3.2 million sq m of residential space and 3.4 million sq m of commercial space, serving 145,000 residents and 217,000 workers.
“The main infrastructure [at Thu Thiem] is already 35% complete,” says Ohan. “Now, what is needed is preferential policies and incentives for developers and investors.”
“Once that happens over time, and infrastructure begins to take shape, we trust the market will respond,” he says. “Perhaps a new ‘Thu Thiem skyline’ is the solution to our challenges.”