As with any property market, Vietnam has begun to experience the tell-tale signs of unchecked demand. Demand for office spaces have been outstripping supply consistently, making Vietnam the fifth most expensive office location in Asia. In addition to that, Vietnam is now number 17 on a list of the world's most expensive office locations. Increased demand in prime office locations began shortly after the country's entry into the World Trade Organisation. The country's economy has been booming with many overseas property investors looking to profit from the country's economic success. Forecasters are predicting good things for Vietnam throughout 2008. In fact Vietnam's gross domestic product is expected to be topped only by China and India.
This is causing increasing numbers of foreign real estate developers to invest directly into markets. Ho Chi Minh City's rental prices have gone up by over 40% over the last year. The lack of prime office space means that businesses are going to pay an average of US$68 per square meter per month. The current development schedule will probably not bring relief anytime soon. Occupancy rates will again be tight through the rest of the year, but this rental boom will not be sustainable. Using the economy to determine rental prices, the average should only be around US$40 per square meter per month. It is only the lack of supply that has caused such increases.
There is little concern that Ho Chi Minh City will join Hong Kong, Tokyo and London in the top ten most expensive office locations. The high asking price for leases has caused many businesses to hold back in terms of expansion and many businesses are looking to occupy lower grade office buildings until rental prices for prime buildings returns to a reasonable price.
It is estimated that 2009 will see a dramatic increase in the supply of prime office locations. Once they become available, rental prices should soften.
