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Foreign investors snap up prime office space in downtown Saigon

Foreign investors have massive interest in building Grade A office for lease in downtown Saigon due to high market demand.
Foreign investors have massive interest in building Grade A office for lease in downtown Saigon due to high market demand.

Foreign investors currently own majority stakes in about 50 percent of high-end office buildings in downtown Saigon.
A newly-released Savills Vietnam report said investors from Singapore, Hong Kong, Japan, South Korea, Germany and Slovakia own stakes in nine Grade A office complexes in prime Saigon locations. Asian investors hold a bigger market share than that of European companies.

Given the scarce supply of Grade A office space in the nation’s commercial hub, current occupancy rates in this segment are above 95 percent, and monthly rents have reached their highest in nearly half a decade at $50-70 per square meter.

This has spawned many M&A deals in this property segment. Notable among these is the purchase of a 24 percent stake in Sun Wah Tower by Japan’s Nomura Real Estate Company earlier this year. The tower is located on the Nguyen Hue walking street in District 1.

With demand remaining high, many new real estate companies have entered the market.

Alpha King, a Hong Kong based real estate company, announced its plan to construct a 35 storied Grade A office building on Tran Hung Dao Street in District 1, close to the Ben Thanh Market. Work on this building is expected to completed by 2020.

Slovakian investors plan to build the Friendship Tower on Le Duan Street, also in District 1. Construction of the 21-story building began this May and is expected to finish by 2020.

When complete, both Alpha King and Friendship Tower will respectively contribute 72,000 and 19,000 square meters of Grade A office space.

Su Ngoc Khuong, investment director at Savills Vietnam, said there are many foreign investors in Group A projects because they are cash-rich while such projects require big investment capital.

The limited amount land available in prime Saigon locations has also led to great interest among foreign investors looking to make profits from renting space to both foreign and local companies.

Explaining why international corporations are boldly investing in grade A office buildings in Saigon in recent years and are likely to do so in the years to come, Khuong said that global economic integration will continue to increase demand for office space in the city, thus creating a sustainable and profitable cash flow for Group A office leasing projects.