The cost of leasing offices in Ho Chi Minh City dropped 53 percent last year as the global slump forced companies to shelve expansion plans, according to real estate broker Cushman & Wakefield Inc.
The largest drop in the Asia Pacific region was also due to the sharp increase in the supply of Grade A space, the broker said in a report on Tuesday.
Rents for prime office buildings in HCMC fell 53 percent to US$39.02 a square foot last year, the broker said.
ââ‚¬Å“As the global economic slowdown impacted in the first half of the year, many multinationals postponed or cancelled their expansion plans, significantly reducing occupier demand,ââ‚¬ it said.
The pledged foreign investment for the city fell by 86 percent last year to end at $1.2 billion, according to the local Planning and Investment Department.
ââ‚¬Å“Any immediate recovery within the HCMC market may be slow as a result of a large amount of space scheduled to be delivered to the market in 2010,ââ‚¬ the report said.
Recent project announcements inform that a total of nearly 300,000 square meters of gross area ââ‚¬" representing a one-third increase compared to the existing supply ââ‚¬" are expected to go into operation in 2010.
New supply in 2010 will probably continue to be concentrated in District 1, which accounts for the majority of total new supply. There is also a predicted increase in supply in suburban districts, notably 4 and 7, due to the easy access they provide to District 1 and the high costs in the central business district area.
HCMC office market is least likely to see another booming period in the next few years until the huge FDI inflows resume and businesses consider expansion again, experts said.
Tokyo most dear
The Asia Pacific region recorded the steepest decline year on year, with rents falling on average by 16 percent. The overall fall in rents was mainly driven by sharp falls in the key financial markets in the region. Singapore, recorded a fall of 45 percent, Hong Kong, 35 percent, and Tokyo, 21 pct.
Declining at a slower pace, Tokyo replaced Hong Kong as the worldââ‚¬â„¢s most expensive office location. Londonââ‚¬â„¢s West End was the second most expensive district while Hong Kong slipped to third.
The global recession prompted companies to lease less space, causing rents to slump across the
main business districts last year, Cushman & Wakefield said. The last worldwide decline in prime rents happened in 2003, according to the report. Companies also switched to cheaper premises and leased their excess space to other firms, hurting demand.
Global office rents will probably reach their low point this year as companies in some of the recovering economies regain confidence, the broker predicted. Rental growth is already being recorded in some districts, including the cities of London and Oslo.
This year ââ‚¬Å“will not be without its challenges and risks, but it will be a year of recovery and cautious optimism for both landlords and occupiers,ââ‚¬ Cushman & Wakefield said.
Reported by Thanh Nien staff