Ho Chi Minh City's office rents may rebound by the end of next year, boosted by demand and a lack of new supply after the opening of the city's tallest building, CBRE Vietnam Co. said.
Office rents in Vietnam's biggest city may fall another 5 percent and stabilize by mid-2012 before picking up as space in the new building is absorbed, said Marc Townsend, managing director at the Vietnam unit of the world's biggest commercial property broker. Binh Minh Import-Export Production & Trade Co., known as Bitexco, opened its 262- meter (860-foot), $270 million tower a year ago, adding 37,000 square meters of office space.
"We've got a few more months of falling rents and associated values," Townsend said in an interview Monday. "Buildings like the Bitexco Financial Tower opening were bound to affect the market, but now there are only a few more big buildings to come on the market."
The decline in rents by next year may make Vietnam more competitive for investors seeking to expand after office leasing rates in Ho Chi Minh City surged past those of Jakarta and Bangkok during the nation's property boom before the global financial crisis in 2008, Townsend said. The nation's economy is expected to expand 6.3 percent in 2012, according to International Monetary Fund estimates.
New supply may be limited by Vietnam's banking industry, which has been hampered by the impact of property bubbles in recent years, the World Bank said in June. Curbs on credit for real estate contributed to a sharp slowdown in the nation's construction in the first half, the Asian Development Bank said last month, while high interest rates and inflation fed "weak" real estate sales this year, Standard & Poor's said in August.
"The decline in rents is very painful for people who borrowed large amounts of money to develop property over the last three years," said Townsend. "But we don't expect to see many new projects because very few banks will look at loans now for property."
The average asking rent in the third quarter was down between 7 percent and 9 percent from a year earlier, according to a report from CBRE Vietnam. Slow office rental markets and high interest rates contributed to a feeling of "desperation" in the country's property market, according to the U.K.-listed Vietnam Property Fund Ltd.
"The third quarter of 2011 has continued to provide a difficult climate for real estate, with loan restrictions and high interest rates," London-based property brokerage Knight Frank LLP said in a report on Ho Chi Minh City's property market released this week, adding that "the current market is believed by some to be near the bottom of the property cycle."