Existing office space for rent in the existing center of Ho Chi Minh City shortage creates opportunities for Thu Thiem to become the new center of this market.
Office market in Thu Thiem “throne”
According to JJL Vietnam, the existing administrative center of the city is currently lacking the supply of grade A offices, pushing demand up with rents jumping to record levels.
Starting in 2015, Ho Chi Minh City’s office market is expected to receive overwhelming demand with an impressive net leasable area for all office segments. 2017 welcomed four Grade A and B buildings entering the market, three of which recorded occupancy rates of over 70% at the time of opening.
Meanwhile, the average occupancy rate of Class A and Class B offices in HCMC is higher than 94%. This shows huge demand in the market for Grade A and Grade B buildings including old and new buildings.
The shortage of supply in the short term leading to higher rents will continue to drive capital inflows into the office market in HCMC and Vietnam, both from existing and new entrants. The biggest challenge now is where to invest? In that context, the Thu Thiem urban area emerged as the brightest candidate.
With land and opportunities in the CBD increasingly limited, office tenants in HCM City are slowly looking out of the traditional center. With this development, Thu Thiem new urban area, which is considered as the new trade center of Ho Chi Minh City in the future emerged as a new potential office center for the urban more than 10 million people.
As the infrastructure of Thu Thiem is improving, large companies will begin to see Thu Thiem as a viable solution to replace the existing administrative center of the economy… Thu Thiem’s overall plan will certainly reduce the pressure on urban space that HCMC is facing. Thu Thiem possesses 657 hectares located opposite the current administrative and economic center on the banks of the Saigon River.
The whole area consists of 176 plots of land with approximately 3.2 million sqm of floor space and 3.4 million sqm of commercial space. Thu Thiem will be home to 145,000 residents and 217,000 employees. The new financial center will be home to a number of corporate headquarters and will become a vibrant destination for residential, office, shopping, hotel and serviced apartments.
According to JJL, investors, early arrivals and large area use along the Thu Thiem river will enjoy the first advantage in terms of opportunity, location, and vision. The general trend of the next cycle, the consideration of moving to Thu Thiem will be met with medium and long-term benefits such as competitive rents at a lower cost than the existing center, open space with density low-rise building, infrastructure and easier connection with the growth corridor of Ho Chi Minh City.
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However, the external market factors, the challenges and the shortcomings of Thu Thiem now are mainly lack of support for infrastructure development and lack of preferential policies to encourage more investment in the new urban area. This unit recognizes that initial steps in most large-scale projects take quite a bit of time. Only when the first developmental milestones are completed does the project really attract the attention of the market.
Thu Thiem is built as a smart city will be the ideal answer for investors and tenants seeking solutions for the shortage of office space for rent in the current market in HCM City. “With 35% of the major infrastructure completed, the Thu Thiem Skyline will be the solution to the current challenges of the Saigon office leasing market,” said JLL.
Thu Thiem land price is approximately 1/3 of District 1 land price
According to the latest report, the price of land in Thu Thiem is now one third higher than the price of land in the existing center of HCMC (District 1), still relatively lower than the price in adjacent districts of District 1 such as District 3 and District 4. In addition to the growth of land prices in Thu Thiem, adjacent areas such as Dong Van Cong, An Phu, Thao Dien also have a spectacular increase.
With the rapid urbanization, the pace of change in the meat market of Thu Thiem urban area and most importantly the completion of legal projects, land prices in this area is forecasted. It will continue to increase in the coming years. This will be a benefit to investors pioneering Thu Thiem from the early stages of adoption of higher risk.
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