Office buildings in HCM City. In the fourth quarter, rent for both grade A and B offices have been stable. — VNS Photo Viet Thanh

HCM CITY (Biz Hub)— In the fourth quarter the HCM City office buildings market has remained stable with limited new supply in grades A and B in both the central business districts and elsewhere, according to property consultant CBRE.

The Government's success in reducing inflation (and lending rates), cutting back spending, attracting foreign direct investment and achieving reasonable GDP growth of 5.6 per cent have improved market conditions, which in turn have improved the confidence and outlook of both established businesses and new investors.

This demand in the market combined with limited supply has helped to stabilise rents and reduce vacancy rates. In the fourth quarter rents for both grades A and B have been quite stable (0.1 percentage points down from the previous quarter).

In terms of vacancy rates, grade B performed slightly better than grade A as they declined by 3 and 1.8 percentage points from a year earlier.

Net absorption in the quarter improved significantly for both grades A and B – by 59.8 pps and 31.7 pps – which the latter continuing to perform better than the former.

The five most active sectors were banking, finance, insurance, drugs, manufacturing and IT/technology even as relocation for cost reasons ceased to be a major driver.

Expansion and new leasing are expected to drive the office market next year given the economy is improving and Viet Nam returns to the radar screen of investors.

For small- to average-sized occupiers, the market does still provide some viable options, but for occupiers seeking quality, international standard, and managed buildings in the central business districts, limited new supply will come from large scale, mixed-use projects and from those developed partly for owner occupation.

The notable projects coming online in 2015 include Vietcombank, Viettel, and SSG .

So while construction can be seen across the central business district, the reality is that for large tenants planning an occupancy solution, the market will remain tight until the end of 2014.

As a result rent levels will remain stable at least until Q1 2015 when the next wave of supply comes online. — VNS