• OFFICE segment has seen new high-quality supply outside the city centre, promoting balanced and sustainable market development. In the latter half of the year, Ho Chi Minh City will welcome four new projects in the Grade B and C segments.
• RETAIL sector is experiencing dynamic growth, driven by the expansion of the F&B industry in major cities during the first six months of the year, as well as diverse and innovative store concepts from international luxury fashion brands.

Office Segment: High-Quality New Supply and Green Office Spaces

In the first half of 2024, the office market in Ho Chi Minh City showed positive indicators. According to Savills, the supply in Q2 increased by 2% compared to the previous quarter, raising the total office floor space to 2.8 million m² across 386 projects. Notably, three new projects in suburban areas continue to drive balanced and sustainable growth across the city. Grade B welcomed E-Town 6 in Tan Binh District, while Grade C saw the addition of Victory Tower in Go Vap and L'mak 68 in Phu Nhuan.

Average office rents increased by 2% quarterly and 8% annually to VND 815,000/m²/month. Occupancy stood at 89%, down 1 percentage point (ppt) quarterly and 2 ppts annually, mainly due to lower occupancy rates in new supply.

For Grade A offices, the same report by Savills highlights strong performance in suburban projects, with occupancy increasing by 6 ppts quarterly to 84%, the highest among all grades. The average rent also rose by 5% quarterly to VND 1.1 million/m²/month. Notable projects with strong absorption rates include The METT, The Hallmark, and The Nexus.

Tu Thi Hong An, Senior Director of Commercial Leasing at Savills Viet Nam, noted that the market occupancy rate remained largely unchanged in the first half of the year. In essence, this indicates that net leasing equalled new supply.

“This corresponds with strong economic growth, where demand exceeds supply amidst new developments like remote work and technology applications in office spaces. Hence, with absorption rates matching new supply, we predict that office rents in Ho Chi Minh City will stabilise over the next three years,” analysed Ms An.

The Savills expert highlighted the increasing presence of green office projects, as sustainable office spaces are becoming a mandatory standard for many multinational corporations. In developed markets like Singapore, Shanghai, and Hong Kong, the proportion of green buildings and larger leasing spaces are significantly higher than in Ho Chi Minh City and Ha Noi. In contrast, the proportion in Viet Nam's two main cities remains below 25%, with limited future supply growth expected.

“Ha Noi and most major regional markets are tenant-driven. In contrast, landlords in Ho Chi Minh City continue to wield significant influence. Grade A office vacancy rates in Ho Chi Minh City are below 10%, and the number of green buildings is relatively low. Most international companies prefer high-end offices, giving these buildings a clear advantage over older ones. This dynamic will continue to evolve thanks to this unique supply-demand relationship,” she added.

Retail Segment: Economic Recovery Fuels Growth

In the retail sector, Ms Tu Thi Hong An pointed out a prominent development where F&B tenants are driving expansion in Ho Chi Minh City and neighbouring markets like Bangkok and Singapore.

“These are observable changes. Many F&B models on the market, from fast food, cafes, and bars to casual and fine dining, are actively seeking growth. Consequently, this sector is becoming increasingly competitive with participation from both local and international players. Additionally, we are witnessing a rise in dynamic lifestyle offerings like sports and health services,” Ms. An explained.

An also cited examples such as Nitori, the Japanese home and lifestyle retailer, recently entering the market with five stores, aiming for rapid growth like Muji. Muji itself plans to open another 100 stores across Southeast Asia, focusing on the Viet Nam market. Another prominent retailer, Miniso, plans an ambitious rollout of 350 to 400 stores across Southeast Asia, with specific targets in Viet Nam.

“Meanwhile, jewellery, watch, fashion, and luxury retailers are expanding selectively, adhering to stringent standards that few locations in Ha Noi and Ho Chi Minh City can meet. Thus, they must be very creative in their expansion strategies, such as targeting tourist hotspots, using multichannel approaches, and creating pop-up stores. Exploring various innovative retail formats will help them enhance social media visibility, thereby improving both their online and physical stores,” the expert added.

Savills report recorded an average transaction size of 256 m² NLA in the first half of 2024, a 26% year-on-year increase, with brand chains like Muji, Poseidon, and Uniqlo expanding. The fashion sector accounted for 35% of leased space, followed by F&B with 30%, home appliances and furniture with 15%, and entertainment with 11%.

From a broader market perspective, Ms Cao Thi Thanh Huong, Senior Manager of Research at Savills Ho Chi Minh City, commented, “The strong recovery of the domestic economy has boosted retail development, attracting new brands to enter the market and continue expanding.”

In Ho Chi Minh City, a young population, a growing middle class, and increasing wealth will contribute to the expansion of the modern retail market. According to Oxford Economics, consumer spending in Ho Chi Minh City is forecasted to increase by 8.4% by 2025. Modern retail in this city of over 13 million people will also account for 50% of the retail market share by 2025.

In Q2, the supply of retail rental space increased by 1.5 million m², up 2% after the opening of Vincom Mega Mall Grand Park. Future retail supply continues to shift to non-central areas, with 75% of total future supply. The overall market occupancy rate reached 94%, up 2 ppts quarterly and 3 ppts annually in Q2 2024. Occupancy in the central and inner-city areas increased slightly by 1 ppt.

Ground floor rents reached VND 1.3 million/m²/month, stable quarterly and up 3% annually, as 20% of the total supply in Ho Chi Minh City experienced rent increases after landlords halted incentive policies.