Outlook 2023 Vietnam

VIETNAM

KEY MESSAGES BRISBANE HO CHI MINH CITY

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 No new supply is expected in the CBD area (District 1) until 2024 when The Nexus is launched, adding more than 30,000 sqm of Grade A office space into the market. However, this is still subject to laws and government regulations.  After 2025, the CBD is expected to welcome an influx of Grade A supply, with a total of more than 120,000 sqm coming on stream.

 Given instability in the global economic context, demand is likely to slow. Net absorption in 2022 is expected to be at 6,300 sqm, mostly due to low availability of Grade A supply in the CBD area. Accordingly, the new supply in Thu Duc City is expected to be absorbed quickly and achieve approximately 50% occupancy by the end of 2023, resulting in about 34,000 sqm in net absorption.  Overall vacancy is expected to increase to 11.7% in 2023 from 4.9% in 2022. Vacancy of

 Rents are forecast to remain stable with less than 2% growth until at least 2025 due to limited supply in the CBD and new supply in non-CBD areas having lower rents.  Accordingly, the net rent of the Grade A office to be maintained at US$51.5/sqm/mo by the end of 2022 and reach US$52.3/sqm/mo in 2023.

 District 7 is likely to rise as a new business hub thanks to its

affordable rents, newer projects with advanced

technology, abundant space for new development, and prospective infrastructure being developed.

above 10% is expected to endure, leading to tenant favourable conditions.

HO CHI MINH CITY NEW SUPPLY

NEW SUPPLY (SQM)

80,000

 New supply in HCMC is expected to reach about 65,000 sqm in 2023; however, this would come from outside the CBD.  The next new CBD building will be The Nexus (30,000 sqm), which is currently under construction with expectant completion in 2024.  Beyond 2024, supply is more

FORECAST

70,000

60,000

50,000

40,000

uncertain with at least three projects starting construction; recent market instability may influence the progress of these projects.

30,000

20,000

10,000

-

2020

2021

2022F

2023F

2024F

2025F

2026F

Source: Cushman & Wakefield

HO CHI MINH CITY DEMAND & VACANCY

NET ABSORPTION (SQM) AND VACANCY RATE (%)

FORECAST

50,000

18.0%

 Tenant demand in 2022, albeit limited, has been driven by industries such as E commerce/Fintech, Technology, Retail, Logistics, and Banking. High-quality supply remains desirable and in high demand.  Citywide net absorption of Grade A is expected to accelerate, driven by new supply in non-CBD areas.  With a consistent stream of new supply, vacancy is expected to remain high at around 10-15%. However, net absorption is expected to trend higher in 2025 and 2026 with healthy take-up of new projects.

45,000

16.0%

40,000

14.0%

35,000

12.0%

30,000

10.0%

25,000

8.0%

20,000

6.0%

15,000

4.0%

10,000

2.0%

5,000

-

0.0%

2020

2021

2022F 2023F 2024F 2025F 2026F Net Absorption Vacancy Rate

Source: Cushman & Wakefield

HO CHI MINH CITY RENT GROWTH

RENT (USD/SQM/MO) AND RENT GROWTH (% PER ANNUM)

FORECAST

65

4.0%

 Overall, citywide average rent is expected to be stable in 2022-2024 period with less than $1 increase per annum. After that, a 2-3% growth is expected in 2025-2026 as new high-quality supplies entering the CBD submarket.  New supply is generally expected to have above-average asking rent. Specifically, new projects in CBD areas may have asking rents of up to $73 (two projects) and $76 (one project).

64

3.0%

63

62

2.0%

61

60

1.0%

59

0.0%

58

57

-1.0%

56

55

-2.0%

2020

2021

2022F 2023F 2024F 2025F 2026F USD/SQM/MO Rent growth (%)

Source: Cushman & Wakefield

KEY MESSAGES HANOI

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 By the end of 2022, Hanoi CBD is expected to welcome one new project with 8,104 sqm added to the current Grade A supply stock.  Beyond this, a total of nearly 237,000 sqm of new supply is forecast for the 2023-25 period.

 Given the ongoing economic instability, demand is expected

 Rents are forecast to be

 Hanoi CBD is likely to remain tenant favourable in the near term. The Starlake New Urban Area, which will become a prospective business hub in the future, is currently under developed. New infrastructure and new projects, either planned or under construction,

relatively stable over the forecast period, registering less than 1% growth per annum.

to slow. Accordingly, net absorption is projected to reach about 18,400 sqm in 2022.

 Vacancy is expected to increase to 15% in 2022 from 8.5% in 2021, but then decline through to 2026.  With the abundance of new

are likely to make the area attract occupier attention.

supply across Hanoi, the market is expected to be tenant favourable over the forecast horizon.

HANOI

NEW SUPPLY

NEW SUPPLY (SQM)

160,000

 By the end of 2022, Techcombank Tower (8,104 sqm) will enter the CBD area. The non-CBD market will also welcome nearly 21,500 sqm of supply through Lancaster Luminaire in the Secondary region.  Until 2025, at least one large-scale project is expected to enter the Hanoi market every year – all of which are in non-CBD areas. The two largest projects are both scheduled to complete in 2025, totalling almost 150,000 sqm.

FORECAST

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

2020

2021

2022F

2023F

2024F

2025F

2026F

Source: Cushman & Wakefield

HANOI

DEMAND & VACANCY

NET ABSORPTION (SQM) AND VACANCY RATE (%)

FORECAST

50,000

35.0%

 Tenant demand in 2022 has been driven by industries such as Insurance, Finance/Banking, Manufacturing, E-commerce, and Logistics. High-quality new supply remains desirable and in high demand.  A flight to quality is driving the market as tenants chase limited prime space and newer and better developed large-scaled projects in non-CBD areas. Healthy net absorption is expected across the market in the upcoming years.  Vacancy is expected to head higher before easing in 2026 once new supply stabilises.

45,000

30.0%

40,000

25.0%

35,000

30,000

20.0%

25,000

15.0%

20,000

15,000

10.0%

10,000

5.0%

5,000

0.0%

0

2020

2021

2022F 2023F 2024F 2025F 2026F Net Absorption Vacancy Rate

Source: Cushman & Wakefield

HANOI

RENT GROWTH

RENT (USD/SQM/MO) AND RENT GROWTH (% PER ANNUM)

FORECAST

8.0%

35.0

 Rents are expected to rise by nearly 4% by the end of 2022, driven by the influx of high-quality new supply with higher asking rents. Accordingly, citywide average gross rent is projected to be at US$34/sqm/mo.  Afterwards, rents are expected to remain stable as competition from non-CBD areas becomes more prominent.

34.5

6.0%

34.0

4.0%

33.5

2.0%

33.0

0.0%

32.5

-2.0%

32.0

31.5

-4.0%

2020

2021

2022F 2023F 2024F 2025F 2026F USD/SQM/MO Rent growth (%)

Source: Cushman & Wakefield

CONTACTS

RESEARCH: Cuc Le Head of Research, Vietnam Cuc.Le@cushwake.com LEASING: Ngoc Le Head of Leasing, Vietnam Ngoc.Le@cushwake.com

TENANT REPRESENTATION: Thuan Nguyen Head of Tenant Representation, Vietnam Thuan.Nguyen@cushwake.com CAPITAL MARKETS : Stephen Higgins

Head of Capital Markets, Vietnam Stephen.Higgins@cushwake.com

Asia Pacific Dr Dominic Brown Head of Insight & Analysis, Asia Pacific dominic.brown@cushwake.com

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