Quality service needed for sustainable growth
By Dinh Dung in HCMC
Among sectors in the property market, the office building segment over the past year has felt the biggest impacts of the economic downturn, forcing many developers to slow their projects and making corporate tenants reluctant to rent space. A large amount of office space coming to the market this year will continue a highly competitive year for landlords, though positive demand in the market has been seen in recent months. Property experts suggested the property market as a whole and the office market in particular would have sustainable development once landlords improved service quality and had their facilities managed more professionally.
Looking ahead with positive prospects
Looking back at the office market over the past year, one can see that landlords have experienced tough periods as rental rates and occupancy levels declined significantly as a result of new supply and sluggish demand. As a domino effect, the economic downturn forced major firms to cut costs due to decreasing revenue. On the list of cost cutting were unnecessary capital expenditure and staff costs with reduced office space demand minimizing budgets. It was not until the second half of last year that office leasing activity picked up and confidence began to return to the market.
Looking at the large amount of office space poised to enter the market, many property experts have projected that this year will be a challenge and a competitive year for agents and landlords alike in finding tenants to fill their properties. And of course tenants will have a chance to bargain for office rents.
However, property experts maintain a positive outlook for the office segment, projecting that business will continue to grow for landlords once they know how to adjust their properties to market demand.
Nigel Smith, executive director of landlord project service in Asia of CB Richard Ellis (CBRE), told local landlords at a presentation themed The Reality of Being a Commercial Landlord in Asia held at the Park Hyatt Saigon in downtown HCMC last week that the prospect for HCMC’s office market was good thanks to improved infrastructure and growing business sectors.
Smith shared years of experience as a property expert in Asia that the ups and downs in the office market were a natural cycle of development, and it was not oversupply but a natural trend. Big cities in neighboring countries have experienced the same situation.
Smith said that looking back to office demand a year ago one might see the market was halted, but the market has changed as demand returns along with the V-shaped economic recovery of the country.
According to CBRE, the office market in HCMC provided 238,500 square meters last year, and the absorption level was around 154,000 square meters.
CBRE says supply has filled up quicker than expected and signs of companies reviving head counts this year are up. The company is witnessing increased tenant enquiries every month. Rents appear to be bottoming out after last year’s falling, and several deals for around US$30++ per square meter are being signed each month.
The market research company reports that big projects will join the market this year, adding more new supply to the market. It is projected that vacant space will reach 170,000 square meters, about 134,000 square meters of new space and 37,000 square meters of existing space.
…and improving quality for growth
It is for sure that the economic crisis is not forever as businesses will continue growing and the commercial property market will become more mature. However, property experts suggest that investors and developers look at long term investment and be more professional with service quality.
Like elite hotels which often hire professional management companies to run the properties, landlords should consider outsourcing their management for the sake of effectiveness. Thanks to having experienced teams and marketing tools, professional companies know how to promote those properties and find tenants to save costs and maximize profits for investors. A long-term strategic plan should be the focus rather than the day-to-day operations of the property.
Smith of CBRE said that key decision making factors would be costs, including rent and fit out cost, lease length and flexibility, financial strength of the landlord, quality and efficiency of the building, international building management standards and the sustainability standard of the building. He did note that rent was not the most important factor, but instead the image and service quality of a property.
He says environmental concerns impact the property market given the global energy trends and real estate developers and managers are adopting green business practices around the world. Green values will contribute to making a property project more marketable.
The Saigon Times Daily