Global real estate company, CBRE Vietnam has just released a new report on the state of Vietnam’s divers Co-Working Space (CWS) market. Vietnam has seen strong development in CWS spaces during the last several years and according to CBRE’s data, Hanoi leads the country with 19 CWS spaces, closely followed by HCMC with 15 CWS spaces. These CWS spaces are managed by 23 CWS companies, including two international CWS companies.
CBRE says that the number of CWS spaces in Vietnam grew by 62% in 2017 and that this new real estate sector has averaged a 55% growth rate per annum during the past five years. By the end of this year, the number of co-working spaces is expected to increase to 45, with Hanoi having a 56% market share and HCMC having a 44% market share.
The key major local operators, include Circo, Dreamplex, Toong and UP. Each of these companies are expanding quickly, however with new companies entering the market, each of the aforementioned companies now accounts for a smaller share of the market compared to 2017.
Vietnam’s CWS market is expanding quickly, both in terms of companies and venues. There are smaller CWS operators who have only one location that are expanding quickly in both Hanoi and HCMC. In 2017, the single unit CWS operations comprised 30% of market share and are expected to grow to 42% market share by the end of 2018.
Foreign companies with regional or global CWS operations are also becoming active in Vietnam. NakedHub, which was founded in Shanghai has come to Vietnam in a big way and will two spaces in Hanoi as well as 2 spaces in HCMC and has said it will have five active locations in Vietnam by the end of 2018.
Another regional company, The Hive, which has operations in Hong Kong, Singapore and Thailand, has also added Vietnam to their network with the opening of a space in HCMC’s District 2, Thao Dien area in 2017. The company says that they will open at least one additional location in 2018 and are looking for real estate opportunities.
As well as The Hive and NakedHub, other international CWS operators are also looking to enter Vietnam in 2018 and 2019. However, even with their aggressive entry into the market, CWS development by local management companies will continue to develop since the international and local companies each have different business strategies with specialized niche offerings to their target markets.
International CWS companies are aggressively trying to find space in Grade A office buildings as well as upscale Grade B buildings in prime central business district (CBD) areas to establish both their brands and market share within Vietnam. Prime real estate in both Hanoi and HCMC are as international CWS spaces report a 75-80% average occupancy rate.
Domestic CWS companies, especially those with single unit operations generally have their CWS spaces in buildings that are not considered prime, or that are in the central business districts of Hanoi and HCMC since management companies are extremely expensive to their costs. Local CWS spaces are normally found in underutilized buildings in decentralized locations that are on the fringes of the CBD area. Both Toong and UP, major CWS operators in Viet Nam, operate their centers from Grade B or lower-grade buildings.
In Hanoi, several of the CWS s[aces are located in Cau Giay district, an emerging office cluster. In HCMC CWS spaces are spread out across the city. There are CWS spaces in Districts 1, 2, 3, 4, Binh Thanh and Phu Nhuan.
The cost of renting a CWS space varies across each city, according to the building location and quality, the services that the CWS provides, and the brands and types of business of other CWS tenants. CWS spaces in Hanoi and HCMC are generally priced lower than most other cities in the Asia Pacific, which reflects the general advantage of renting office spaces in Vietnam.
In HCMC, as several CWS operators had expanded in the CBD area in the beginning of 2018, pricing for private offices reportedly increased from 30-50% in venues in central districts.
In 2017 CBRE Research Vietnam undertook research on CWS tenants and found the following information:
* 91% of people using a co-working space are millennials, under the age of 35. This proportion is higher than the global average of 67% and reflects Vietnam’s young demography, a good source of demand for CWS spaces.
* 54% of CWS tenants in Hanoi and HCMC were either the founders or employees of start-ups. Start-ups included both local and overseas firms.
* 14% of CWS tenants were freelancers and self-employed.
* 55% of CWS tenants work in the IT industry.
* 45% of CWS tenants work in other sectors, including education, finance, marketing, real estate and tourism.
CBRE said in its report that there are a number of factors that will continue to push the CWS market forward over the next several years. These include the fact that the Vietnam CWS market is still relatively new, compared to Asia Pacific countries; that there is a high-demand for CWS spaces by tenants and that local real estate developers who have projects on the fringes of CBD areas, as well as those in developing areas are eager to cash in on the CWS opportunity. CBRE believes that these factors will also create opportunities for M&A (merger and acquisition) activities in this sector in the future as both new and existing CWS companies expand their brands and reach.