Knight Frank releases second annual flex space study
Xem Tiếng Việt 
Data shows supply climbing 16% with rents falling over a third
Knight Frank Vietnam this week announced the findings of its 2023 flex space study into the growth and development of the serviced office and coworking sector in Ho Chi Minh City. The annual study reveals a 16% increase in leasable floor space sector-wide across the southern metropolis and a commensurate fall in overall occupancy and asking rents.
July 2023 saw the city offering a total of 95,300 m2 of space, 12,800 m2 more than last year, with the 2023 city-wide average occupancy of 81%, down five percent from the year prior.
Average asking rents for private offices within flex spaces have fallen by 34% to US$209 per person per month, while monthly hot-desk rates have similarly fallen by 35% to US$139, likely due to the increase in supply – notably in non-CBD areas – seeing operators offer lowered rates to attract tenants.
Still, the 16% growth in floor space reflects broad optimism in a sector that – according to leading player, The Sentry – is developing purpose-built spaces to attract and address the needs of the burgeoning creative industries. This includes design, music and video production, and media. Its new Sentry P location in Thao Dien is furnished using recycled and sustainable materials, the facility boasts Fitwell Certification and even a robotic cocktail maker, all designed to appeal to this creative niche and augment The Sentry’s traditional strongholds of tech firms, e-commerce businesses, entrepreneurs, and start-ups.
The Sentry and other leading brands are bucking the downward occupancy trend in the sector, with floor space take-up typically above 90% across its properties.
“A reputable brand, impressive office facilities and amenities, stylish design, and prime locations are seen as the recipe for success for co-working operators,” said Mr. Leo Nguyen, Director of Occupier Strategy & Solutions at Knight Frank Vietnam. “Many companies are also looking for the flexibility to scale their businesses up or down – and co-working and serviced office operators are well positioned to offer this flexibility.”
The numbers bear this out, with CBD co-working occupancy rates tracking at 79% and emerging business and entrepreneurial centres such as Thu Duc City (notably the Thao Dien Ward) averaging even higher occupancy rates of around 87%. This is significantly higher than other non-CBD districts and wards such as Phu Nhuan and Tan Binh – which are often only 40-50% occupied. This reflects both an increased demand for prime locations by larger tenants, and by smaller occupiers looking to be surrounded by like-minded businesses and the support infrastructure that some of the more established operators are able to offer – particularly in a time when new enterprise registration has declined by 0.5% y-o-y in the first half of 2023.
“This connection and sense of community has been key to our success at The Sentry. We are very selective about who we will let in as part of our internal commitment to create spaces of like-minded people and companies. This is why we host functions in our dedicated event zones to further foster this spirit,” said The Sentry’s CEO & Co-Pioneer, Mr Greg Ohan.
“While we are hearing a lot about back-to-office decrees globally, Vietnam’s companies are broadly looking for ways in which remote or hybrid working models can be made to fit with the local environment, Vietnam’s younger workforce, and the market dynamics,” said Leo.
Ohan concurred, saying: “Vietnam’s younger demographics don’t necessarily translate well to work-from-home and hybrid working models, despite their popularity among many Gen Z workers. The hybrid model is a little ahead of its time in Vietnam as younger team members will often need the mentorship and guidance of senior staff, and the inspiration, connection and collaboration that an in-person work environment provides.”
“In addition to places like The Sentry, we are seeing some impressive new offerings and retrofits in the co-working industry,” Leo commented, with a nod to his own firm’s recent leasing efforts, which saw a leading global insurance company open a new 3,000 m2 flex space complex on Nguyen Van Cu Street in Ho Chi Minh City’s District 1.
“In this case, the developer, in partnership with the occupier, took an old warehouse and stunningly renovated it into one of the city’s flagship co-working locations. This reflects an increased willingness from co-working operators to be more amenable to built-to-suit locations for larger tenants looking to occupy the entire centre or a significant proportion of the space. These mutually beneficial partnerships decrease the CAPEX for both tenant and lessor while still offering a flexible location that can scale and grow with the occupier, and provides the city with a model it can look to for repurposing existing spaces and protecting heritage properties.”
