HCMC Office Leasing Guide

This is the overall characteristics and guidelines about Ho Chi Minh – HCMC Office Leasing for companies that want to start or expand businesses and look for an office in Vietnam.

Of course, there will be a lot of issues that need to be clarified and agreed upon in the search and lease agreement process. In order to get the best agreement as well as save your resources and time, it is better for a professionalism and credibility local agency to represent you to work with the landlords by their relationship, knowledge about the local and office leasing market.

TYPICAL HCMC OFFICE LEASING

Term	3 – 5 years. Longer for tenants required large space
Breaks	Rarely negotiated
Renewals	Negotiable
Rent basis	Rental fee + service charge
Currency	Must be denominations in VND
Free-rent	1 week – 1 month for fitting-out
Escalation	Corrected if the lease is for less than 3 years, but the growing rental includes escalation to address forex concerns
Security	3 months
Tenant’s broker	The landlord pays, with the guarantor of the tenant
Fit-out	Landlord delivers bare shell. Tenant pays fit-out, typically within rent free fit-out period
Right to sublet	Negotiable
Transparency	Disclosed with the consent of the parties

LEASE LENGTH OF HCMC OFFICE LEASING

Term	In Vietnam, the lease term usually lasts from three to five years. Anchor or international tenants looking for longer leases can negotiate terms from five to ten years.
Termination         or Break	Breaking options are rare but can be negotiated.
Renewal	Renewal options are negotiable, usually have caps and collar in place. A collar is the opposite of a cap, ie, the minimum rental rate.

SPACE MEASUREMENT OF HCMC OFFICE LEASING

Space Measurement	Space is measured in square meters.
Definitions	Gross Floor Area (GFA): All areas within exterior walls at each floor level, excluding mechanical and electrical service rooms, elevators, and stairs.Net Leasable Area (NLA): space does not include all common areas such as corridors, stairs, lift lobbies, toilets, and electromechanical service rooms, and usually includes columns.
Efficiency	The percentage of carpet area with NLA is 95%. The ratio of NLA to GFA is usually around 80, 85%, although this may be as low as 60%.

OCCUPANCY COST

Rent	Rent Quoted Rents are usually quoted in USD per square meter per month.  Currency for PaymentThe tenant pays rent in VND. By law, the landlord must have a VND bank account. If the tenant pays in USD, the bank will convert the payment into VND before crediting to the landlord.When the USD to USD exchange rate decreased in 2009 – 2011, tenants with US $ rent were subject to hidden costs because the US dollar rent required greater payment in the dong when the currency depreciated.New leases are almost entirely signed and signed in bronze, due to increased enforcement of government regulations. With persistent depreciation pressure on the VND, both landlords and tenants try to hedge risks. Leases are made in VND with a fixed annual increase that allows some compensation for the expected devaluation of the currency. Forcing a dong to rent at the rate of USD / VND does not comply with the regulations; therefore, homeowners insert a fixed annual increase in rental rates to compensate for the expected currency devaluation. Rent PayableRent is usually due on a quarterly basis, including service charges, in advance. The tax rate of 10% is not included, but due at the same time. Rent-Free PeriodsThe free rental term is negotiable. Typically, the rent exemption period is based on a specific case based on the occupancy of the building, the magnitude of the covenant, the lease term and the title rent. The rental exemption period usually includes a suitable time period, although service charges and 10% VAT are still applicable during this period. Under current market conditions, landlords are increasingly competing for incentives including free rent periods. Rent ReviewLeases longer than three years usually stipulate that the parties will renegotiate the rental price after the initial three-year period. The parties manage the risk of long-term lease by agreeing to lease the amendment to a predefined range, usually 10-15% of the base rent.
Service Charge	Service fees include management, 24-hour security for common areas, cleaning, lighting, power supply, plant and machinery maintenance, pest control in common areas, outside window cleaning, clean up trash, lift, and electricity to operate the air conditioning system during normal business hours.The tenant pays a service charge plus 10% VAT in addition to the rent, based on the rented area, on a GFA or NLA basis. The charge varies from building to building, depending on the services provided and the quality of the building. Particular Service fee is:Grade A: USD 5–8 per square meter per month.Grade B: USD 4–6 per square meter per month.Grade C: USD 3–4 per square meter per month
Taxes	VAT tax 10% is due to both rental and service charges. VAT is paid to the landlord
Utilities	Electricity: Typically in buildings A and B, electricity (excluding air conditioning) is metered and paid to the owner. Air conditioning during normal business hours is included in the service charge. In some cases, electricity may be included in the service charge.Water: Water charges in public areas are included in the service charge. The tenant pays water in the tenant’s space. Tap water is not potable in Vietnam, so tenants must arrange and pay for drinking water.Telecommunications: The tenant pays the phone and internet service directly to the service provider
Fit-Out	Standard handover is ceiling cover, ie, concrete floor/floor with the finished ceiling. Tenants usually pay for all tenant improvements, such as receptionists, partitions, interior doors, wiring, cables, furniture, floors, and ceiling modifications. Hardware and IT phone systems are the responsibility of the tenant. Appropriate costs range from 150 – 600 USD / m2.
Restoration	The tenant usually must restore the property to its original condition at the end of the lease term or pay the landlord, unless otherwise agreed.
Security Deposits and Guarantees	The tenant pays the deposit based on the leased area, on a GFA or NLA basis. A three-month security deposit is usually paid when signing the lease. At the end of the lease, the landlord will return the deposit in the same currency as received, excluding interest. If the parties renew the lease for a different term, the security deposit is usually adjusted at the new market rate.
Car Parking	Renters often pay extra for parking. In Ho Chi Minh City, this tax is approximately $100 – $200 + 10% VAT per car parking lot per month for Grade A buildings. In Ho Chi Minh City, motorbike parking is usually $10 – $20 + 10% VAT per bike every month. Depending on market conditions, landlords are increasingly competing for incentives including parking.
Other Occupancy Costs	Air conditioning after working hours, internal hygiene and insurance

TRANSACTION COSTS

Agency Fees	Landlords pay this fee, tenants do not have to spend any cost for an agency to find an office for them.
Legal Fees	Both parties share legal fees.
Other Transaction Costs	Both parties share other costs incurred (if any) related to the preparation and implementation of the lease contract.

OTHER LEASE PROVISIONS OF HCMC OFFICE LEASING

Standard Lease	Landlord or agent provides the draft lease agreement, usually with standard terms and conditions
Right to Sublet	The sublease is carried out on a case-by-case basis, but requires the owner’s consent if the business license does not grant the sublease right.
Option to Expand & Right of FirstRefusal	Options to expand are negotiable. Tenants may negotiate in their lease agreement the first right of refusal to contact space on the same or floors adjacent to the same terms and conditions contained in a party offer. Tuesday, with 15 days to match any third party Party offers. Usually negotiated on a case by case basis
Signage and Naming of Building:	Depending on the market and building conditions, each building has a place to place the company’s name in the building (standard size). If a tenant wants to place a large-size sign outside the building to promote the company’s image, the tenant will have to pay an extra fee to place the billboard.

If you want to inquire about an office location or start operating or expand your business in Vietnam, contact us today. We offer a free consultation to understand your requirements and put you on the right track.

CONTACT US

We offer a free consultation to support you to find a suitable Office For Lease In Ho Chi Minh:

Phone: (+84) 398 716 459 – Available via Whatsapp/ Viber/ Zalo

Email: contact@lookoffice.vn

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