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Office leasing fees to drop sharply   2008-09-12 - TBKTSG

Cushman & Wakefield, one of the world’s leading companies in providing real estate solutions, just joined Vietnam’s market six months ago, but it has twice given forecasts dissatisfying to real estate developers – that office leasing fees will decrease.


When entering Vietnam in March 2008, Cushman & Wakefield released a survey which said that Vietnam ranked 13th among countries with the highest office leasing fees in the world, but said the fees would decrease in the future.


Toby Dodd, General Director of Cushman & Wakefield in Vietnam, on September 9 predicted that office leasing fees in Vietnam would slide by 50% at least in 12-24 months, while investors and real estate management firms still believe that the fees will rise further.


Mr Dodd said that office leasing fees will drop sharply from the end of 2009, when a lot of offices for lease are put into operation.


However, he did not give exact figures about how many offices will be put into operation from the end of 2009. He just estimated that there are 74,307 sq m of A-class offices for lease now in HCM City, which were leased at $72/sq m in the second quarter of the year, and $70/sq m in the third quarter. Most of the offices in the centre of the city are occupied by big groups.


The leasing fee of $70/sq m (A-class office) proves to be much higher than the rates in Bangkok (Thailand), Jakarta (Indonesia), Kuala Lumpur (Malaysia) and Manila (the Philippines), other big cities in the region which are directly competing with Vietnam in attracting foreign investment.


Mr Dodd said that the leasing fees in the said cities are hovering around $30/sq m for A-class offices, $20/sq m for B-class, and $10/sq m for C-lass offices.


Therefore, Mr Dodd said that the office leasing fees in Vietnam, especially in HCM City, will decrease gradually and stay at $10-30/sq m for A, B and C-class offices. The rates prove to be even lower than the rate of $35-40/sq m for A-class offices Cushman & Wakefield itself predicted in March 2008.


According to Mr Dodd, the companies now operational in Vietnam have cancelled plans to expand operation, while new investors are seeking offices in places farther from the centre of the city. Therefore, high potentials can be seen in the development of B-class offices and offices in the suburbs of the city.


As forecast, multinational corporations may choose Vietnam for their headquarters in Southeast Asia if they can see infrastructure and office projects developing. The development of projects in the retail sector could prompt Vietnamese people to spend more money in the domestic market, instead of going shopping in other regional countries.


“Vietnam is losing foreign currencies when it is shopping in Singapore, Thailand and Hong Kong,” he said. “If there are more shopping centres, Vietnamese customers will spend money in the home market.”


The expert believes that Vietnam’s real estate market will keep developing well as the capital is still pouring into the market and interest in the market is increasing.


According to the Ministry of Planning and Investment, the total foreign direct investment (FDI) in real estate and tourism sectors reached $22.2bil in the first eight months of the year, while the total FDI registered capital was $46.3bil.

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