Global office markets have taken a hit. In the US some commentators have forecasted a 40% fall in value from pre Covid levels. Following the pandemic, occupiers have yet to stabilise, albeit we now see a more concerted return to (office) work. Office demand has weakened in the short term as decentralisation, post pandemic resource reviews and altered demand have all impacted this asset class. The office market in Vietnam is somewhat insulated, having broader structural elements contributing to office demand, as well as healthy office occupation. However, it is not immune to the global contagion influencing office markets.

With a muted historical cycle, offices in HCMC and Ha Noi have performed well, particularly compared to their regional counterparts that are chronically oversupplied. Both cities now face a refresh of quality supply that will, mostly, hasten obsolescence in poorer quality assets . Vietnamese office markets like HCMC and Ha Noi are characterised by strong supply of Grade C buildings, that may quickly become non-competitive.

With this supply looming, we ask what's in store for Grade A & B rents and occupancy over the near term. Should occupiers lock in at current market levels, or take an extended lease term? What real numbers can developers and landlords accept, rather than a leasing hunch? What escalation rates should be used when calculating lease commitments under IFRS?

Access Savills Office Forecast 2023 for rent trends in Vietnam to 2026.