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Office rent coming down   2009-02-24 - VietNamNet/SGT

Le Tan, managing director of Vitamin4B Marketing and Advertising Company, is searching for a new home for his company, after two years on Phan Xich Long Street in HCMC’s Binh Thanh District, to give a facelift and facilitate business for his medium sized company.

The grade A Sunwah Tower on Nguyen Hue Blvd.

Unlike a year ago when available office space in HCMC was limited and difficult to find, Tan now feels no rush and takes his time moving a pencil down a long list of office buildings before writing a short list which suites his company budget. Lower rent this year gives him a chance to relocate his company while his landlord is tempting him to stay by reducing his rent from the current US$20 per square meter for his grade C office space.

The greater number of office vacancies in the city are attributed to the economic downturn as well as new stocks coming through the pipeline and are creating pressure for office building investors who have reduced rents.

Marc Townsend, managing director of the CB Richard Ellis, said in a seminar named ‘Standing out in a challenging and crowded market’ at the Palace Hotel in HCMC last week that since the end of last year his company has received considerably fewer inquiries for office space. The economic difficulties are forcing many companies to reduce office space and to shelve their expansion plans to ride out the tough times.

“Inquiries for office space are down by half since last year. This is obviously due to the global recession and uncertainty in the market. Many companies are demonstrating a ‘wait and see attitude’ or a moratorium on capital expenditure till Q3 2009,” Townsend said.

The company predicted that available office space in the city will reach 1.2 million square meters by the fourth quarter this year and will double within three years.

In last year’s feverish office market, rent rose to nearly US$70 per square meter for grade A space, US$45 for grade B space and US$39 for grade C space.

Grade A office space is now available from US$48 to US$60 per sqm per month, grade B office space from US$28 to US$40 and Grade C office space from US$14 to US$25.

Townsend projected that office rent could drop to 2002 levels, or US$30 per sqm for grade A, US$20 per sqm for grade B and US$10 per sqm for grade C.

“When we see such a big adjustment in rents we also expect to see an increase in demand as companies use this opportunity to drive a hard bargain, take extra space for when the recession ends and position themselves for when rents start to rise again,” Townsend added.

In September, real estate service provider Cushman & Wakefield made a surprising projection saying that HCMC office rent would fall to the 2002 level starting at the end of 2009.

Toby Dodd, general manager of Cushman & Wakefield Vietnam, said that competitive office rents were supporting economic development and that it was imperative that Vietnam retain its competitive edge in the current economic climate.

Landlords today offer more incentives to attract tenants, even give several months rent free. Some have to reduce rent to keep tenants.

Tan, of Vitamin4B, said he would move to District 3 and reduce office space to save money.
“In the current difficult time, I would trim cost by reducing office space rather than laying off staff,” Tan said.

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