Startup dreams bring real money to Vietnam’s office market
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Young companies looking for their first home are spiking the demand for small-sized office space. Tan, a self-employed real estate broker, paid $5,000 per month for the use of a six-story building in downtown Ho Chi Minh City. He then turned it into 15 office rooms with polished tiled floors, private bathrooms and internet connections.
The offices, ranging from 25 to 40 square meters, are now rented out to startups at between VND5 million and VND10 million ($220 – $440) per month, said Tam, who asked to be identified by his first name only.
For fledgling startups, which try to make every penny count, these small-sized offices with good locations fit their budget.
Tan said currently 10 companies are his tenants, claiming a return of 20-25 percent.
Local brokers said some estates in the city’s downtown areas are becoming mini-hubs for startups. These young companies give the office market in Ho Chi Minh City and Hanoi a much-needed boost as many landlords struggle to fill space, they said.
However, according to Le Huu Dung, chief executive at brokerage Weland Investment, not just any space will do.
“We have seen a strong growth in mini-office rentals in Ho Chi Minh City in the past two years following the recent startup boom,” Dung said. “While some investors have earned decent profits, others are losing money.”
No one who starts out in such a tiny office expects to stay there for long, Dung said, referring to the fact that when startups become bigger, they will move to larger offices.
Another flip side of the business is that this segment mainly relies on idea-stage companies, which may not even last longer than just a few months.
Dung warned that if the occupancy rate is lower than 80 percent, the investor will start losing money.
Questions & Answers
Q.What is the typical size of the small office rooms mentioned in the article?
What is the typical size of the small office rooms mentioned in the article?
The office rooms created by Tan range in size from 25 to 40 square meters. These are rented out to startups, offering a suitable fit for their budgets and allowing them to make every penny count.
Q.What rental price range do startups typically pay for these small offices?
What rental price range do startups typically pay for these small offices?
Startups rent these small offices at prices between VND5 million and VND10 million per month. This translates to a range of $220 to $440 monthly, according to the article.
Q.What occupancy rate is considered the minimum for investors to avoid losing money in this market segment?
What occupancy rate is considered the minimum for investors to avoid losing money in this market segment?
Le Huu Dung, from Weland Investment, warned that investors in this mini-office segment will begin to lose money if the occupancy rate falls below 80 percent, highlighting a key risk.
Q.How many tenants does Tan currently have in his repurposed building?
How many tenants does Tan currently have in his repurposed building?
Tan currently has 10 companies as tenants in the six-story building he converted into 15 office rooms. He claims this venture yields a return of 20-25 percent.
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