Office demand in fast-growing Vietnam a boon to developers   A file photo of Ho Chi Minh City's Thu Thiem new urban area. Photo: Dinh Son Prospects of strong economic growth and foreign investment are driving Vietnam's office property segment, with local and international developers both trying to grab the remaining prime locations in big cities quickly, industry insiders said. A group of US and Vietnamese investors have recently sought Ho Chi Minh City's permission to develop a US$4 billion complex of office and entertainment buildings, which is expected to be the city's new financial center. According to the plan, the complex will cover around 11 hectares at the new urban area Thu Thiem on the east of the Saigon River. Construction will be completed in more than three years. The project was proposed by investment company Cantor Fitzgerald, architectural company Steelman Partners, and Taiwan-based developer Weidner Resorts of the US's Weidner Holdings. Vietnam's trading company Imex Pan-Pacific Trading Group, known for operating a chain of duty-free shops and fast food restaurants at airports around the country, is their partner. The investors are among many developers who are seeking opportunities in the office property segment in Vietnam. Singapore's CapitaLand Ltd, for instance, is reportedly looking to invest in Vietnam's office property segment as the company seeks to grow its portfolio beyond residential and serviced apartments in the fast-growing economy. Pham Sy Liem, deputy chairman of the Vietnam Construction Federation, said the recent market reccovery has prompted many foreign developers to expand in Vietnam. "We are seeing a lot of both local and foreign investors and developers try to get a foothold the rapidly rising emerging office market," said Liem. Vietnam’s economy grew 6.68 percent in 2015, the fastest pace in five years, helped by an expanding industrial sector and record foreign direct investment. The government has also stepped up efforts to clean up bad debts in the financial system, some of them tied to property. In Hanoi, of the total supply, Grade A and B offices account for 36 percent and 64 percent, respectively, according to a report of property firm CBRE. Rental for Grade A office increased 0.5 percent to $28.2 per meter in the second quarter of this year from the first quarter. Meanwhile, rental for Grade B office declined 0.6 percent to $17.7 per meter. Around 715,000 square meters of office space across all grades are expected to come onto the city's market in the next two years. Based on CBRE’s enquiries, banking and finance, logistics and technology still remained the most active sectors during the first half of 2016. Most of CBRE enquiries were from Asia Pacific. Higher demand Nguyen Hoai An, head of the Research, Consulting and Property Consulting, Valuation for Hanoi at CBRE Vietnam, said the country’s participation into the Trans-Pacific Partnership and the launch of the ASEAN Economic Community will boost foreign investment and result in higher demand for office and apartments for rent. “To the office property segment, Vietnam is a potential market to long-term investors,” she said. According to CBRE, Hanoi and HCMC are short of high quality office buildings in prime locations, where many foreign companies want to rent for locating their offices. Le Hoang Chau, chairman of the HCMC Real Estate Association, said it is time for foreign developers to invest in office projects in business districts of major cities. There are fewer large land lots for the such projects, he said. Only investors with strong financial capacity could implement the projects because it will take a long time to recoup the capital spent on prime locations, Chau added. Many investors have recently chosen to enter the market by taking over existing estates. Foreign and Vietnamese investors spent at least US$1 billion in deals to acquire real estate projects in the first three months this year, according to the Ministry of Planning and Investment. Early this month, Singapore-based Mapletree Investments said it has acquired Kumho Asiana Plaza Saigon Company in HCMC from Kumho Industrial and Asiana Airlines. Mapletree said in a statement that the deal is its largest acquisition involving a completed, income-producing property in Vietnam. Kumho Asiana Plaza in District 1 houses offices, serviced apartments and a hotel managed by InterContinental Hotels Group. Hiew Yoon Khong, CEO of Mapletree, said his group is also keen to invest in opportunities to develop office, retail, residential, serviced apartment and mixed-use developments, either on its own or with local partners. Mapletree entered Vietnam in 2005 and has since expanded into industrial parks and acquired several development assets in Hanoi and HCMC. It is developing Saigon South Place, a 4.4-hectare mixed-use project in District 7. Work on a 30,000-square-meter office tower, as part of the project, is expected to be finished by the end of this year, while construction of a serviced apartment building and a residential block is scheduled for completion in early 2018. Earlier, Singapore’s real estate company Frasers Centrepoint Limited (FCL) said it will develop a residential and office project in HCMC with a local partner. The project, located on a one-hectare prime residential site, is expected to comprise condominium units, serviced apartments, offices and retail shops. FCL now owns an office building, Me Linh Point, in HCMC, and is also managing two serviced apartment properties. "The macro trends in Vietnam, such as a growing middle class, rising urbanization and increasing income, coupled with the improving financial environment and relaxation of foreign investment rules, make this an exciting time for real estate in Vietnam," said CEO Lim Ee Seng. By Bao Van, Thanh Nien News