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Office accomodation Print E-mail
Written by Administrator   
Saturday, 11 March 2006
Article Index
Office accomodation
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Ho Chi Minh City

HCMC has a rapidly developing economy, well educated population and modern facilities. Average municipal economic growth is forecast to be 11.5% in 2005, compared to the country's average over the past 10 years of 7.4%. Residence’ average per capita income was US$1,800 in 2004 (compared to USD$420 nationally), and city authorities estimate that it will reach USD$3,000 by 2010

HCM City covers 2,095 sq.km, divided into 24 districts hosting an official population of more than 6.12 million. The southern business capital is a major transport centre, well connected by road, rail, water and air to the rest of the country, and internationally. The city has a network of rivers and canals spanning 2,900 hectares, which are convenient for both navigation and irrigation. The city's power, water and telecommunications are reliable. There are 14 industrial parks (IPs) and export processing zones (EPZs) in HCM City: Tan Thuan, Linh Trung 1&2, Tan Tao, Hiep Phuoc, Le Minh Xuan, Tay Bac Cu Chi, Cat Lai, Phong Phu, Binh Chieu, Tan Binh, Vinh Loc and Tan Thoi Hiep.

What most people (and maps) refer to as Ho Chi Minh City, infact only accounts for some 26% of the total area. The remaining 74% is basically split between the south-eastern mangroves & swamps of Nha Be, Binh Chanh & Can Gio Districts; and the northern-western low lands of Cu Chi & Hoc Mon. The city is undergoing ‘urbanisation’ so rapidly, that by 2020 the 17 inner city districts are expected to have a population of 5.8 million to 6.4 million, while the suburban area will have 3 million to 4 million residents.

Between 1999-2004 Ho Chi Minh City’s population experienced an increase of more than 1 million people or an average of 200,000 inhabitants a year, according to Municipal Economic Institure & the city’s Planning and Construction Institue, which also said that migrants account for 30% of the city’s 7 million people.

General Overview

As in Hanoi, development sites for ‘international standard’ buildings ie @1,000 sqm, are almost impossible to assemble with the only large sites typically owned by the Communist Party, the People’s Committee, the military, or current or former (post equitisation) Saigon based SOEs, of which the largest include the ‘Big S’s : -

1-SRECO or RESCO : - Saigon Real Estate Corp has a large land bank and numerous projects and intensions but, obviously finite & insufficient financial resources. In many ways, they have an unenviable job since, by their ‘quasi-governmental’ nature, they are expected to assist the local authorities in implementing their plans to build countless residential units & infrastructure projects. Since June 2004, RESCO has been a holding company (a bit like a chaebol) with many subsidiaries including the Housing & Trading Co; Binh Thanh District Housing Co; Go Mon Real Estate Co; District 3 Housing Co; Tan Binh District Housing Co; District 8 Housing Services Co; District 11 Construction & Trading Co; Building Materials Can Gio District Construction & Housing Co; Saigon Construction & Housing Co; Saigon 5 Construction & Trading Co; District 10 Construction & Real Estate Services Co; and Cho Lon Construction Housing Co.

2-Satra : - Saigon Trading Corpora­tion is the owner of the prime 9,200 sqm corner site on Nguyen Hue & Le Loi that currently owner occupied as Tax Plaza. A USD$121 million redevelopment project of the site promises a 43 floor mixed use development. They also own good sites on Hai Ba Trung; have stakes in industrial parks; a site on Phan Dang Luu in Binh Thanh; a site on Tran Van Kieu in District 6; the Saigon Supermarket on Ba Thang Hai in District 10; co-owner of the An Giang Commercial Center; the Artex Saigon building (Artex is another member of SATRA); a trade centre in Tien Giang province; and the former owner of the Diamond Towers project on 3,800 sqm bordered by Nam Ky Khoi Nghia, Nguyen Trung Truc, Le Thanh Ton & Le Loi (now owned by Saigon Jewelry Holding Company - SJC), to name just a few.

3-SaigonTourist : - Owner of the Continental; Majestic; Grand; Kimdo & JV partners in Saigon Domaine; New World; Sheraton;……it is a very long list including the prime 6,000 sqm ‘Flag Pole’ / Saigon Space s Ton Duc Thang that is about to be developed as a USD$64 million retail & apartment complex. SaigonTourist have projects in many projects from Phu Quoc in the south to Hue in the centre & Ha Long in the north.

4-Sunimex : - Otherwise known as Ben Thanh Tourist have a large mixed property portfolio including Cat Lai Industrial Park; stakes in Norfolk Mansion & Riverside apartments; the USD$8.5 million 15 floor Heritage House apartment project; the @USD$77 million 35 floor Vietcombank Tower on a 3,000 sqm site overlooking the Saigon River surrounded by Ton Duc Thang, Hai Ba Trung, Mac Thi Buoi & Phan Van Dat; the US$18 million 25 floor Le Loi Plaza on 1,500 sqm at 4-6 Le Thanh Ton; the long scheduled USD$524 million Saigon Cultural & Commercial Center project covering 10.4 hectares on 23rd September Park including a 5 star hotel, a 38 floor skyscraper, a 72,000 sqm commercial centre and many other state-of-the-art business & leisure facilities; an office development at 174 Ky Con; and several tourism projects nationally.

5-SAVICO : - Saigon General Service JS Co (SAVICO) is an affiliate of Sunimex and has large many prime sites and is an investor in the Times Square development and tourism projects like Ben Thanh – Non Nuoc; Long Hoa – Can Gio (with Fideco); Can Gio Eco-Tourism Resort and developer of a 3,000 sqm trading centre; several apartments & offices in District 1; a USD$10m housing project in Thu Duc; and a commercial centre in Danang.

Between them and their affiliates and partners, these conglomerates control most of the ‘best’ sites by virtue of their historic and current links with the local authorities and each other.

International Standard Office Accommodation

Ho Chi Minh City only has a combined stock of international standard office accommodation of about 250,000 sqm, an inadequate number relative to the ever increasing demand. Thus rentals have almost doubled in less than 5 years to the current levels. However, local investors have recently seen the investment opportunities available and are thus now rapidly filling the supply gap with a wide variety of new developments, both big and small.

Opinions vary as to how rentals at Grade A – B buildings will move over the next few years although most concur that Grade C – E rentals will fall. By how much is good question given the still small size of most requirements of foreign firms (very few occupy over 250 sqm); the declining to stable number of expats employed coupled with strict new foreign employment registration stipulations; and the dramatic increase of total stock, countered against the inevitable increases in demand as more FIEs turn a profit and expand; the inevitable positive impact of Vietnam’s accession to the WTO; the continuing increase in interest from other ASEAN businesses following Vietnam’s implementation of AFTA (ASEAN Free Trade Association); and the increasing desire of local companies to ‘up-grade’ to purpose built office buildings with all the ancillary facilities & services that they provide in terms of security, back-up power and parking.

However, it is own view that ultimately office rentals cannot be higher that those charged in Bangkok (which for reference are currently @USD$19 sqm / month – after 15-25% increases in 2005 from @USD$16), which at the end of the day is far more developed physically, economically & legally and so far more attractive to foreign investors. Afterall, the only reason why rents are as high as they are today is because supply has not matched demand, which is a reflection not only of a general lack of foreign interest in Vietnam’s real estate market from @1996-2005; the limited financial capacity of Vietnamese developers (the entire stock market is only worth @USD$140 million of which about a third are only worth @USD$2 million combined); but mostly for legal reasons (see “Foreigners & Land? information sheet on the website) and the almost total unavailability of sites. Land has not been made available because Vietnamese people and companies have an almost irrational ‘affection’ for owning land, which partly stems from the fact that there is no landlord & tenant legislation; no statutory rights to renew; no cost to ownership; few investment alternatives; absence or failure to implement & enforce the bankruptcy laws; and the perceived kudos.

Local Standard Office Accommodation

The other segment of the market is building developed by local investors to local standards. In this respect, they can generally be considered as Grade D-E buildings. Usually, they have small floor-plates of less than 500 sqm and / or are in secondary or tertiary locations. Parking, back-up power, fire systems & escapes, and the general capability of the management and / or landlord are also considerations. Quality varies, as one would expect, but in common with their larger and more prestigious foreign invested counterparts, most have occupancies of over 90% and so are in a powerful position to dictate terms and conditions.

Last Updated ( Saturday, 14 October 2006 )
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