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Office leasing fees sliding on low demand   2009-03-05 - VietNamNet/DTCK

Like many other commodities, the office leasing fees have been decreasing sharply due to the lower demand and higher supply.


The office building owned by Gemadept on Le Thanh Ton street in district 1, HCM City, which became operational in June 2008, has been fully occupied. The leasing fee here is $50.5/sq m, while leasing contracts are valid for three years. The contracts’ provisions stipulate that the two sides will discuss on the leasing fees after three years.


The clients signed contracts on leasing offices at Gemadept’s building at the beginning of 2008, when the market of A-class leasing offices was very hot in HCM City. However, the leasing fee, according to CBRE Vietnam, a real estate consultancy firm, has dropped drastically. The leasing fee has dropped to $40/sq m from the highest peak at $60/sq m at the end of 2007 or early 2008, and is expected to see further drops in 2009 and 2010.


As such, the office building owners like Gemadept will be put under the pressure of slashing leasing fee before the leasing contracts expire. This could be seen as a kind of sharing risks between the parties.


According to CBRE Vietnam, the average office leasing fee has decreased by 20% for both B and C-class offices, while it is highly possible that the office leasing fees will return to the price levels in 2000-2002


The owner of a B-class building on Ben Chuong Duong street in district 1, HCM City, said that one of his clients, a securities company, has asked for the fee reduction of 15%. He said that he would have to accept the request in order to maintain turnover in the context of fewer clients


CBRE Vietnam has organized a meeting of 80 investors who have offices for leasing in HCM City. The meeting showed that the competition among investors in attracting clients has become fiercer. It is not so easy to find clients these days as businesses all cut down workforce and limit operation expansion.


In order to please clients, office building owners now can slash the leasing fee by up to 30%, while offering many attractive conditions.


Observers said that there have been signs of the office supply boom with the supply expected to increase by two or three folds in comparison with 2007-2008. The supply of offices for leasing in 2009, 2010 and 2011 is expected to rise by 122%, or 1mil sq m more will be available on the market.

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