CBRE VIETNAM

HO CHI MINH CITY

www.cbrevietnam.com January 2012

VIETNAM HO CHI MINH CITY

Economics Quick Stats
Vietnam achieved a GDP growth
g rate of Amid the national wide economic slow
Change from last 5.89% y-o-y in 2011, whicch was slightly down, HCMC still witnessed a relatively
VIETNAM Current Yr. Qtr. lower than the 6% targe et set by the strong economic growth of 10.3%y-o-y.
10 3%y o y
Government.
Real GDP Growth 5.89% HCMC continued to lead the tourism
The Government achieved some sector to new levels with many
Implemented FDI $2.8 bil
success in maintaining growth while entertainment events held to
Exports $26.2 bil trying to control inflation at the same international standards. Christmas and
time. The Government had d a number of year end holidays provided the fourth
Imports $28.9 bil
responses to the rising in nflation in the quarter of 2011 with 1 million
CPI (average) 18.58% first half of 2011, and the intervention international arrivals, presenting a
Tourism (arrivals)
of monetary policy successsfully reduced relatively high growth rate of 20% y-o-y.
1.7mil
inflation, particularly durin
ng the second HCMC recorded a total of 3.5 million
Base Rate 9% half of 2011. arrivals in 2011 with the largest
proportion of visitors coming from US,
Exchange Rate (e-o-p) 20,828 Previously, inefficiency in the banking
Japan and Taiwan.
*The arrows are trend indicators over sector and high cre edit growth
the specified time period and do not
represent a positive or negative
exacerbated inflation. In n the fourth The opening of the Thu Thiem Tunnel
value. quarter the first signs of re
estructuring in (T3) is the culmination of a long-
Hot Topics the banking sector were se een with SCB, running infrastructure project. This
Ficombank and Tin Nghia Bank achievement demonstrates the
• ECONOMY: Inflation begins to slow merging. It is expected that further possibilities of infrastructure
as the macro economy stabilises. restructuring will be seen n in 2012, in development, and is only one of many
HCMC sees 10%+ GDP growth the banking and also public infrastructure projects that will be
and notable increases in tourism companies. unveiled through to 2020. The T3
arrivals and remittances; certainly supports the economic position
Inflation at year-end dropp ped below the
• OFFICE: Vacancy in the Grade A of the city, but also showcases the
benchmark of 20%, over which
w analysts
market drops as landlords push for improving infrastructure citywide, which
consider unsustainable. Inflation in
deal s to be completed before the gives further incentive to foreign
December ended at 18.13 3% y-o-y, with
year end ; investors to locate and invest in HCMC.
averageg inflation for the fu
ull yyear being
g
• RESIDENTIAL: Slow sales force 18.58% y-o-y. Overseas remittances into HCMC was
developers to look for alternative expected to reach US$5 billion by the
Inflation adjusted retail and services
sources for capital; end of 2011, returning a 10% y-o-y
turnover grew at the slow rate of 4.7%
growth.
• RETAIL: The market sees notable ugh conditions
y-o-y, emphasising the tou
actions with the opening of The many companies face heading into CPI, VN (% y-o-y))
Crescent Mall and re-opening of the 2012. CPI, VN (% m-o-m)
Refinancing rate (%)
K h Link;
Kumho Li k
Efforts in Curbing Inflation Rediscounting rate (%)

• SERVICED APARTMENTS: Limited

25 3.5
supply ensures that rental levels
CPI (% y-o-y) / Interest rates (%)

3
perform better than most other 20 Inflation surged
Monetary controls took effect
sectors in 2011; 2.5
CPI (% m-o-m)

15 2
• INDUSTRIAL: Growing interest in
1.5
market
k t ffollowing
ll i theth natural
t l 10
1
disasters in Japan and Thailand 5 Monetary controls
during 2011; on interest rates
0.5
0 0
Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11

© 2012, CB Richard Ellis, (Vietnam) Co., Ltd.

 MarketView HO
OFFICE MARKET
GRADE A GRADE B GRADE C TOTAL

O CHI MINH CITY

Number of buildings 9 47 234 290
GFA (sm) 304,380 805,682 782,638 1,892,700
Vacancy rate (%) 24.6% 17.3% 10.1% 15.5%
Q-o-q change (pts) -6.1 pt -0.7 pt -0.1 pt -1.4 pt
YY-o-y
o y change (pts) -14.6
14.6 pt 3.3 pt -1.8
1.8 pt -2.3
2.3 pt
Average asking rent (US$ psm per month) $32.16 $18.09 $14.87 $19.03
Q-o-q change (%) -5.8% -1.5% -3.0% -3.5%
Y-o-y change (%) -8.3% -7.5% -8.5% -9.4%

Grade A Grade e A rents saw a notable decline during the

Grade B
Vacancy (%) Grade C final quarter
q of the year, driven by leasing activity at
Bitexcoo Financial Tower and Vincom Center. Both
40% buildin
ngs have been open for over a year, but still
recordded notable vacancy at the end of the third
30% quarteer. With the declining GDP growth in 2011,
and teepid GDP growth expected in the first quarter
20% of 2012, landlords at these properties made it a
priorityy to secure tenants before the end of the year.
10% As vaccancy decreases at both properties, landlords
will ha
ave the ability to be more selective about their
0% tenantts, and the special discounts available will not
2007 2008 2009 2010 2011 continue.

There is a continued disparity in Grade A rental

rates as the seven more mature buildings, which
have occupancies
o of above 95%, have been able to
maintaain rental rates at, or higher, than the market
Grade A
averagge.
Grade B
Asking Rents (US$ psm per month) Grade C
Gradee A rents have been decliningg for 12 q
quarters,,
$80
and the very attractive deals available at some
Gradee A properties have compressed Grade B and
C rennts. The rate of decline in these sectors has
$60
slowedd, however, as Grade B and C properties
were already
a well priced given the quantity of space
$40
available.
$20
The foourth quarter saw new supply coming to the
$0 marke et from two new Grade B buildings. PetroLand,
2007 2008 2009 2010 2011 in Disstrict 7, opened 50% owner occupied. The
Vista, in District 2, also came online in Q4. With
rentalss within the CBD becoming much more
affordable than even six months ago, these non-
CBD p properties
p have less of a competitive
p pricing
p g
advanntage than previously. Companies must
considder transport time and costs when choosing a
January 2012

non-CCBD office building.

© 2012, CB Richard Ellis, (Vietnam) Co., Ltd.

 MarketView HO
RESIDENTIAL FOR SALE MARKET
LUXURY HIGH-END MID-END AFFORDABLE TOTAL

O CHI MINH CITY

T l supply
Total l (units)
( i ) 417 15 740
15,740 13 042
13,042 14 213
14,213 43 412
43,412
New completion (units) - 1,091 348 1,918 3,357
New launch (units) - - 498 598 1,096
Primary market - Average asking price (US$ psm) $4,183 $1,628 $920 $663
Q-o-q change (%) -9.1% -1.6% -3.2% -1.3%
Secondary market - Average asking price (US$ psm) $4,136 $1,803 $910 $722
Q-o-q change (%) -2.2% -1.5% -3.9% -0.6%
Y-o-y change (%) -6.0% -4.4% -7.5% -0.7%

The residential
r market made national headlines
Launched
Condominium Supply (units) Completed during
g the fourth quarter as sales continued to
prove difficult for developers and access to capital
30,000 remainned complicated. In the beginning of the
quarte
er a buzz was created when some developers
25,000 appeaared to drop their prices overnight. Some of
20 000
20,000
these offers initially proved to be marketing tactics
rather than firm discounts, but the hullabaloo
15,000 ed brought the question of affordability and
create
deman nd to the forefront of the market.
10,000
Incentives, in various forms, continue to drive sales
5,000 at thee vast majority of projects as developers
continue to strive to maintain their cash flow in the
0 form of
o pre-payments from buyers.
buyers Many discounts
2003 2004 2005 2006 2007 2008 2009 2010 2011P only become
b available during the negotiation for a
sale, therefore,
t achievable prices are likely to be
lower than the reported asking prices.
Luxury
High-end With condominium developers in particular
Asking Price (US$ psm) Mid-end gling for cash flow they have been forced to
strugg
- Secondary Market Affordable
look for alternatives, including leasing out units to
renterss, or the conversion off entire blocks to
$6,000 service
ed apartments. This was evidenced with the
fourth quarter deal between Diamond Island and
$5,000 ed apartment operator The Ascott Limited.
service
$4,000
With buyers also facing difficulties in accessing
$3,000 capital, the upper end of the condominium sector
continued to see difficulties in achieving sales.
sales
$
$2,000
Speculators remained inactive, leaving demand
$1,000 primarily to end-users, who are active only at more
affordably priced products.
$0
2007 2008 2009 2010 2011 End-usser demand that was previously focused on
higherr-end condominiums has shifted to landed
property. Prices for these units have become more
compe etitive
ii and
d end-users
d h
have a preference
f f
for
land, along with the larger amount of livable space
January 2012

omes with it.

that co

© 2012, CB Richard Ellis, (Vietnam) Co., Ltd.

 MarketView HO
RETAIL MARKET
DEPARTMENT STORES SHOPPING CENTRES TOTAL
T l supply
Total l (GFA,
(GFA sm))

O CHI MINH CITY

113,820
113, 820 370 650
370,650 484 470
484,470
Vacancy rate (%) 0%
% 23.2% 17.8%
CBD average asking rents (US$ psm per month) $1099.35 $112.90
Q-o-q change (%) 0.00% -5.3%
Y-o-y change (%) 6.1% -10.0%
Non-CBD average asking rents (US$ psm per month) $499.28 $31.83
Q-o-q change (%) 0.00% -3.7%
Y-o-y change (%) -10.9% -8.1%

The so oft opening of the Crescent Mall, in District 7,

and
a d th
hee ope
openinggoof Kumho
u o Link,, we
were
e the
e do
dominant
a
Department Store
storiess in the fourth quarter. Kumho Link is the retail
Vacancy Rate (%) Shopping Centre compo onent of the Kumho development in District 1.

20% Net absorption

a was notable at 69,988 sm GFA
which was driven by take-up at the Crescent Mall,
15% where occupancy was 75% by the end of the year.

10% Rental rates continued to soften both in both CBD

and non-CBD
n locations during the fourth quarter,
5% as rettailers maintained a cautious approach to
expansion given the tepid economy. In an effort to
0% attractt retailers a number of landlords offered lower
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 rental rates that frequently featured a turnover
2008 2009 2010 2011
compo onent.
onent

Despitte the softening rentals, the growing stature of

the Viietnamese retail market was evidenced with
severa
al new brands making their debut, including –
CBD Asking Rents Department Store
Burgerr King, Charles David, Coach, DKNY and
(US$ psm per month) Shopping Centre Wareh house. Most notably, while Gap announced
they would
w be closing 200 of their 900 stores in the
$140 United
d States, in the fourth quarter they opened two
$120 store in
i HCMC. The first was in Vincom Center in
Octobber, and the second at the Crescent Mall in
$100
Novemmber.
$80
$60 Approoximately 190,000sm GFA of retail space is
$40 expectted
t d to
t come online li i 2012.
in 2012 Though
Th h the
th
$20 locatio
ons, massing and densities of these
$0 develoopments means that they are unlikely to
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 increase rental rates during the year. The increase
pply could lead to slightly declining rentals in
in sup
2008 2009 2010 2011 the ne
ext four quarters. The F & B sector will continue
to be one
o of the strongest performing sectors during
All rents are quoted on NLA, average rents on the ground and 1st floor,
exclusive of VAT and service charges 2012 as restaurant retailers can capitalise on
Vietna
am’s love of eating out.
January 2012

© 2012, CB Richard Ellis, (Vietnam) Co., Ltd.

 MarketView HO
SERVICED APARTMENT MARRKET
GRADE A GRADE B GRADE C TOTAL

O CHI MINH CITY

Total supply (units) 782 2,048 1,037 3,867
New supply (units) 93 122 0 215
Vacancy rate (%) 4.4% 16.2% 16.2% 13.8%
Q-o-q change (pts) -0.5 pp -1.1 pp -0.9 pp -1.2 pp
YY-o-y
o y change (pts) -3.5
3.5 pp -0.9
0.9 pp 0.7 pp -1.0
1.0 pp
Average asking rents (US$ psm per month) $36.54 $26.25 $17.59
Q-o-q change (%) -2.8% 2.6% -0.8%
Y-o-y change (%) -0.6% -5.0% -3.9%

Grade e A rents softened slightly

g y in the fourth q
quarter,,
Grade A
Grade B
but moved less than 1% over the year showing the
Total Supply (sm) Grade C nce of the premium serviced apartment market
resilien
during g what was a tough year for some property
10,000
sectorss. The y-o-y rental changes were greater in the
Grade e B and C markets, where there was growing
8,000
compe etition from buy-to-let apartments throughout
the year. Vacancy rates mirrored the relative flatness
6 000
6,000 seen with
w prices both throughout the quarter and
year.
4,000
There was 215 units of new supply in the fourth
2,000 quarteer. 93 Grade A units came from the 53 units in
the Hootel Nikko project in District 1 and 40 units at
0 the Xi Riverside project in District 2.
08 09 10 11 12f 13f 14f 15f The fo
ourth quarter saw the continued expansion from
interna
ational operators, notable was the continued
growthh of the Ascott group signing agreements to
manag ge further properties in Vietnam, including the
Grade A
service
ed apartment component of the Diamond
Asking Rents (US$ psm per month) Grade B Island development in District 2.
Grade C
An in ncrease in demand was seen for buy-to-let
buy to let
$40 apartm ments in the fourth quarter, reflecting tenants
deman nd for more value for their budget. Key
$35
locatioons were existing developments in Binh Thanh
$30 Districct and new supply coming online in District 2.
$25 At the same time, buy-to-let landlords are becoming
more savvy, arranging a greater package of services
$20 including housekeeping and electric allowances.
allowances
$15
Reflectting the tough conditions being experienced in
$10 the residential
r for sale market, the serviced
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 apartmment market has seen an expansion of ‘hybrid’
2007 2008 2009 2010 2011 products. These are units which were originally
oped as apartments for sale but have
develo
subseqquently, owing to limited sales success, been
operatted by the developer (possibly through a
manag gement agent) as serviced apartment units.
January 2012

Examp ples include XI Riverview Palace and The Vista

in Disttrict 2, Ben Thanh Luxury Apartments in District
1.
© 2012, CB Richard Ellis, (Vietnam) Co., Ltd.
 MarketView HO
INDUSTRIAL MARKET
HCMC BINH DUONG DONG NAI LONG AN
Total supply (Number of IPs) 14 24 30 30

O CHI MINH CITY

Supply basket (Number of IPs) 5 6 6 3
Supply basket (NLA in all phases, hectares) 1,056 3,477 1,890 467
IP - Average land rates (US$ psm per term) $194.00 $56.57 $71.67 $73.33
Q-o-q change (%) 41.6% 7.3% 35.2% 47.7%
IP - Occupancy
O rate (%) 90 1%
90.1% 70 0%
70.0% 75 5%
75.5% 68 3%
68.3%
Q-o-q change (pts) -4 pt -5 pt -0.3 pt 1.7 pt
RBF - Average asking rates (US$ psm per month) $4.14 $3.04 $3.60 $3.00
Q-o-q change (pts) -3.7% -7.9% 0.0% 0.0%
Note: Only major, stabilised industrial parks are tracked in each provinnce/city in the Southern Key Economic Region (SKER).
Land lease term is usually up to 50 years.
The fourth
f quarter saw a slight drop in the
NLA (ha) occupancy rates of industrial parks. This is mainly
Industrial Parks, Performance Occpancy Rate (%)
the ressult of Saigon Hi Tech Park’s expansion, which
4.000 100% reduceed their occupancy by 20 percentage points.
SHTP’ss planned expansion actually reflects
3.000 75%
continued confidence in the market as opposed to
2.000 50% tenantts leaving.
1.000 25% The co
onfidence of landlords was further emphasised
0 0%
when looking at land prices. In HCMC, the rise in
Q3 Q4 Q3 Q4 Q3 Q4 Q3 Q4 land rates
r was mostly a reflection of movement at
HCMC BINH DUONG DONG NAI PROVINCE LONG AN PROVINCE Tan Thuan
T EPZ, where the asking price almost
PROVINCE doubleed from that recorded in the previous quarter.
With the increasing occupancy at this IP, the
L d Rates
Land R t (US$ psm per term)
t ) Land Rates
landlo
ord is confident to raise their asking price.
price

$210 The quarter

q saw little movement in the price of
$180 ready built factories, with only slight decreases
$150 being witnessed in HCMC and Binh Duong.
$120
$90 As intterest in the industrial sector continues to
$60 increase, trends witnessed throughout 2011
$30 strengthened in the fourth quarter.
quarter In 2012,
2012 we
$0 expectt:
Q3 Q4 Q3 Q4 Q3 Q4 Q3 Q4
HCMC BINH DUONG DONG NAI LONG AN PROVINCE • More IP projects with multi-use components.
Devvelopers believe IPs will be more successful
RBF Rates (US$ psm per term) RBF Rates with
h residential areas as well as industrial units;

5.0 • Coontinued interest in Vietnam from

4.5
4.0 manufacturers in Japan and Thailand.
Thailand Owing to
3.5
3.0
the natural disasters that were witnessed during
2.5
2.0
20111, tenants in those regions are looking to
1.5 dive
ersify risk;
1.0
0.5
0.0 • An increase in Government pressure for factories
Q3 Q4 Q3 Q4 Q3 Q4 Q3 Q4 withhin the city to relocate to IPs, freeing land for
HCMC BINH DUONG DONG NAI LONG AN infrrastructure development and other uses;
PROVINCE PROVINCE PROVINCE

• More Government interest on IP energy use and

January 2012

wasste processing issues, with energy efficiency

the ultimate goal;

© 2012, CB Richard Ellis, (Vietnam) Co., Ltd.

 Central Business District (CBD)
MarketView HO CHI MINH CITY
The Central Business District in HCMC is District 1,
the commercial, administrative and tourism centre.
The area bounded by Ton Duc Thang, Nguyen Thi
Minh Khai, Nam Ky Khoi Nghia and Ham Nghi
streets is considered the prime office location where
For more information
f regarding this MarketView or to find
f out more all Grade A buildings and the majority of Grade B
about any aspect of our services, please contact: buildings are located.
Interest Rate
CB Richard Ellis (Vietnam) Co., Ltd.
•The base rate set by the SBV is used as a
RESEARCH & CONSULTING reference by other banks and financial institutions.
•The discount rate is the interest rate that the SBV
Marc Townsend,
Townsend Managing Director charges member banks for short-term
short term loans via
t. 84 8 3824 6125 discounting commercial paper or other debt
instruments.
e. marc.townsend@cbre.com
•The refinancing rate is the interest rate that the
SBV charges on loans to member banks.
Adam Bury, Senior Manager
m. 84 903 028 713 Gross Floor Area (GFA)

e. adam.bury@cbre.com Gross Floor Area includes all areas contained within

the external walls at each floor level and the whole
thickness of the external walls. In general,
Ngoc Le, Publications Manager mechanical and electrical services rooms, refuse
m. 84 908 6666 35 chambers and rooms, water tanks, car parking
floors and all lifts and staircases passing through
e. ngoc.le@cbre.com these floors are excluded from the Gross Floor Area
calculation.
Net Absorption
Net Absorption figures represent the net increase in
occupied floor space in the period. The figures are
Central Ho Chi Minh City arrived at using the following method:
Net Absorption = new completions
+ vacancy figures at the beginning of period
- demolition
- vacancy figures at period-end
Rent
Rent is quoted as the average “asking” rent,
without accounting for any incentives. Rents are
stated in US$ per square metre (psm) as well as in
those terms – gross or net, inclusive (including
management fees and/or property taxes) or
exclusive (excluding management fees and
property taxes) that are customarily employed in
the respective sector.
sector
Rents are quoted on the following basis:
•Office: Asking rents, GFA, exclusive of VAT and
service charges
•Retail: Asking rents, NLA, exclusive of VAT and
service charges
•Serviced Apartments: Asking rents, NLA, inclusive
of VAT and service charges
Residential Supply
•“Existing supply”: is the total number of units
that have been handed over for occupation.
•“New completion”: the total number of units that
were handed over for occupation in the review
quarter – these are added to existing supply.
•“New launch”: the number of units that were
© 2012 CB Richard Ellis (Vietnam) Co., Ltd. This report has been prepared in good faith
and with due care by CB Richard Ellis (Vietn nam) Co., Ltd. We obtained some of the
released to the market by developers (official start
information above from sources we believe to be reliable. However, we have not verified of sales for a project) in the review quarter. All
the accuracy of the information which we ob btained from other sources and make no units in each development are included in the
guarantee, warranty or representation abou ut it. We include projections, opinions,
calculations, however, the developer may divide
assumptions or estimates which are made with careful
c consideration of factors known to us
for example only, and they may not represent current or future performance of the market. sales into numerous phases and thus not all units
This information is designed exclusively for use by
b CBRE clients, and cannot be reproduced may come online at launch date.
without prior written permission of CBRE.