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.