The occupancy rates of coworking office space in Grade A and B buildings last year plunged by 7 percentage points as its supply experienced the lowest growth since 2017 to 6 percent, according to a report by Savills Vietnam, the leading global property services provider.

The gloomy outlook for the coworking space market, which boomed in the country between 2017 and 2019, has prompted investors to cancel expansion plans.

The New York-based coworking startup, WeWork, the third largest startup in the U.S. and the sixth largest in the world, stopped leasing an office in HCMC's District 1 while UP Co-working Space, headquartered in Hanoi, also postponed its plan to open two new offices in District 7, the report says.

The number of newly registered coworking companies in the country also dropped by 6 percent.

"2020 was a challenging year for both traditional and shared office segments. The market has been seeing a number of tenants turn to lower-priced office buildings and shophouses to cut down on rental costs in order to maintain their business," said Vo Thi Khanh Trang, head of Savills Vietnam's market research department.

While the traditional office space has showed signs of slight recovery in late 2020 thanks to better containment of the Covid-19 outbreaks in Vietnam, the shared workspace business has yet to see similar positive signs, Trang said.

Before the Covid-19 pandemic broke out in Vietnam in January last year, coworking spaces had expanded in HCMC’s central districts since the limited traditional office space there was unable to meet burgeoning demand.