The co-working office model potential market in Vietnam
The office market in Vietnam’s major cities has witnessed strong growth of "the co-working office" model. At present, this model is not only booming in two major cities, Hanoi and HCMC, but also spreading to Da Nang, Hai Phong, Ba Ria-Vung Tau and other large city still continue development.
"The co-working office segment targets two kinds of occupiers, small-sized companies and freelancers. In these spaces, individuals sit interleavely and work independently while still sharing their work and ideas together. By choosing co-working offices, businesses and self-employed workers can save on cost, as the office rent includes all service charges such as power, water, security, cleaning, Internet and office equipment".
The co-working office model was born to replace traditional office spaces that are not flexible enough to fit the needs of small-sized businesses. Previously, small businesses in Vietnam set up their offices in apartments. But this practice is no longer allowed, and the restriction has created a huge demand for co-working space.
For small-sized businesses, co-working is a cost-saving solution compared to leasing traditional offices, because traditional office spaces are usually larger than their space demands. In addition, co-working also attracts freelancers because this model allows them to work independently in a private space or meet, discuss and share ideas with peers. "The booming co-working office model in Vietnam" is due to fluctuations of the economy and changes in working behaviours.
Recession always encourages the start-up trend, leading to a boom in small and medium-sized enterprises and creating a culture of entrepreneurship. According to the General Statistics Office, SMEs account for 97 percent of enterprises established in Vietnam over the past 15 years and employ about 50 percent of the workforce. In the first seven months of 2017, the number of established businesses hit 72,953, up 13.8 percent over the same period last year. In addition, creativity and flexibility are two criteria highly appreciated in society nowadays. The co-working office model is consistent with these criteria.
The co-working office model continues to attract investment in Vietnam’s major cities. This model is gradually being integrated into other types of real estate such as retail spaces and hotels. At trade centres and hotels, many developers have built spaces for co-working offices, rather than just focus on retail space or accommodation. Demand for co-working office space keeps increasing while supply is limited. Therefore, according to "Song Chau (SCBI) Office", in the future, this model will grow as a potential market in Vietnam.
Song Chau (SCBI) Office.
Only 7% of total retail supply in Hanoi is located in CBD. 2018 is expected to be an active year in Hanoi retail coming from eight under-development projects. This is the largest number of new projects ever planned for a single year. Hence, new supply causing pressure on the vacancy rate, the landlords should save larger space for anchor tenants as well as increasing the number of anchor tenants. More importantly, high-impact tenants whose products generate intense word-of-mouth marketing online should receive preferential terms.
Vietnam’s retail market has jumped to 6th place, higher than some developed markets in the region such as Singapore, Hong Kong, and Indonesia and showing high potential for further growth. Vietnam market achieved high scores in terms of market saturation with good scope for growth. Saturation in both Hanoi and Ho Chi Minh City is far behind the levels seen in some other SEA cities
Commercial leasing activities will continue to be active, with rental growth and occupancy levels expected to witness sustained improvements across all property types. Meanwhile, occupiers from the traditional sectors of manufacturing, financial and tech industries retained their position representing nearly 50% of total enquiries. Sustainable demand from traditional sectors combined with the rise of new sectors of Logistics, Education, and Co-Working are expected to be key drivers which will boost net absorption.
HCMC office for lease enjoys further with rental growth and demand for office space over the next three years
The office sector in Ho Chi Minh City first quarter 2018 on a positive note. Rents improved in both cities even on the back of new supply added to the market. The improvement in performance was observed across Grade A and Grade B buildings, because of stable predicted growth in the economy and the city’s ever improving infrastructure in the form of metro lines. Projected Rental growth in 2018–2020 is a result of continuing appetite for quality supply
"As the economy had a stellar performance in 2017, Vietnam’s real estate investment scene continues to attract more and more interest from foreign investors and developers across all sectors. Vietnam’s real estate market is entering 2018 with a positive sentiment, despite some skepticisms about oversupply in the upscale residential sector, especially on secondary and rental markets."
"Q1 2018, an estimated 1,280 units of "serviced apartment" supply will enter the market by the end of 2018. In spite of the fact that landlords have enjoyed favorable market conditions with high occupancy rates and steadily increasing rental rates, Ho Chi Minh City serviced apartment market has seen increased competition from new buy-to-let apartments."
In 2018, the East and South will continue to be hotspots of the market with more new launches condominium / apartment. Within the next three years, office and retail market will be more competitive as a large amount of supply from community retail podium will be launched. Rental growth will increase at a slower pace as existing supply will remedy their rents more strategically while vacancy rate will surge up momentarily before dropping down
2017 witnessed the "office market bustling with new supply and healthy absorption." 2018 onwards will witness the market coming up with better supply albeit at a slower pace than 2017. "Rental growth will increase at a slower pace as existing supply will remedy their rents more strategically while vacancy rate will surge up momentarily before dropping down just as quick as the market will continue its healthy absorption momentum with new supply"
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"Vietnam continue attracting foreign investors in 2018 and next ten years". Apart from subjective factors, in terms of objective factors; domestic market with the size of significant "population compared with other countries, young and dynamic population, middle class is increasing, urbanization grows fast pace will be make force the demand not only for housing market, also retail market, office building, etc."