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Cushman & Wakefield forecasts sharp fall in office rent   2008-09-11 - SGT

Cushman & Wakefield, a world leader in real estate services, has projected office rent in HCMC and Vietnam as a whole will fall at least 50% given more developments going online in the market in the next 12 or 14 months and the competitive rates in other regional cities.

High office rent affected foreign companies' plans to invest and expand their business in Vietnam as many were unable to afford such high rates.

"Office rent will certainly come down, I think by half," Toby Dodd, general manager of Cushman & Wakefield in Vietnam, told the Daily after a seminar on real estate investment held in HCMC on Tuesday by the European Chamber of Commerce in Vietnam (EuroCham).

He forecast rent in Vietnam would stabilize at US$30 per square meter for Grade A, US$20 for Grade B and US$10 at Grade C offices, and apartment rentals would also come down.

Office rent in such regional cities as Thailand's Bangkok, Indonesia's Jakarta, Malaysia's Kuala Lumpur and the Philippines' Manila are now at those levels or even lower, he said. "That's why I believe office rent in Vietnam will be lower," he said, adding the current quoting rate of Grade A office here was around US$70 per square meter.

He told the seminar that the Grade A office space totaled 74,307 square meters, with occupancy rate of 100% and most of the offices located in the central business district surrounded by the Opera House, Nguyen Hue, Le Duan and Le Loi boulevards.

He said high office rent affected foreign companies' plans to invest and expand their business in Vietnam as many were unable to afford such high rates. "Existing tenants delay expansion and new market entrants search for lower-cost space in low grade buildings and locations."

Dodd expected things would change as a "dramatic increase in new supply across all grades from the end of 2009 onwards will likely see a significant softening in rent for new premium and Grade A buildings."

Commenting on a huge amount of foreign direct investment in Vietnam's real estate sector this year, he said Vietnam needed better infrastructure including office, retail and housing buildings to support economic growth and allow more companies to open their offices.

Companies will likely choose Vietnam as their headquarters in Southeast Asia if the office infrastructure develop as expected, he said.

As for the retail sector, Dodd said Vietnam was losing "retail dollars" to Thailand, Hong Kong and Singapore as many local people were going overseas for shopping, and better shopping facilities would help bring them back for spending in Vietnam.

He had a reason to say so as Malaysia, Singapore and Thailand are striving to attract more Vietnamese travelers by promoting their chopping tours and mega sale months in Vietnam.

Huge property and tourism projects will also help generate many jobs for related sectors, Dodd said in response to the Daily's question about, local economists' concern over the negative impact of the big FDI property and tourism projects on Vietnam's economy and socio-economic development plans.

However, he insisted on checks for such projects to prevent speculation in outer to ensure real developers and users, not speculators to enter the market. "Speculation is not good," he said, adding proper policies and incentives would help.

He believed Vietnam's real estate market looked positive now and would be booming because of a lot of investment, interest and demand in different areas including hotel; residential, office and retail as well as much FDI flow in the market.

Figures of the Ministry of Planning and Investment show FDI approvals in Vietnam in January-August amounted to a record high of US$46.3 billion, with the tourism and real estate sectors taking US$22.2 billion.

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