ho chi minh city q4 2012 report

Presented by:

CB Richard Ellis (Vietnam) Co., Ltd.

Tuesday, January 3, 2012

Market Insights from CBRE

HCMC Quarterly Report Q4/2012 Review and 2013 Outlook

Dung Duong

Senior Manager

2 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s HCMC QUARTERLY REPORT | JANUARY 2013

CPI ended at 6.8%, better than target of 8%, thanks to the tightening policy.

Government’s success in keeping price pressure down opens the door for monetary easing

• Base rate unchanged while rediscounting and refinancing rate are cut 1% further.

• Deposit interest rate cap decreased by 1% to 8% in an attempt to lower lending costs by

reducing banks’ financing costs

Trade balance posted a first year of surplus in the last 20 years.

Many economic indicators saw an y-o-y growth of 2% to 18.3% except for FDI realisation.

VIETNAM ECONOMY 2 0 1 2 B R I G H T S I D E

-10

-5

0

5

10

15

20

FDI

realisation

ODA

disbursement

Export Import Retail Sales

and Services

Overseas

Remittance

Int'l Arrivals

Y-o-y Growth (%) in 2012

Source: General Statistics Office


GDP reached only 5.03%, lower than target of 5.5%.

FDI disbursement drop by 5% y-o-y unavoidable in the midst of gloomy economy, both

locally and internationally.

Bad debts reached VND250 trillion, equal to 8.83 % of total debt (source: SBV) as a result of

too high credit growth in 2010.

VNIndex saw a downward trend from May to Nov but moved out of the trend in Dec as

investors regained confidence on risky assets thanks to releases of better-than-expected CPI,

trade balance, interest rates cut and sealed M&A deals between Vietnam’s largest enterprises

and strategic foreign investors.

VIETNAM ECONOMY 2 0 1 2 C O N C E R N I N G


Grand opening of An Phu Plaza Launched date: 22st Nov, 2012

Developer: An Phu Corporation

Offered office space: 10,905 sm GFA

At the press time, 50% of office space

has been leased out.

HCMC OFFICE MARKET Q 4 M A J O R E V E N T S

Lim Tower is one of few projects

that is fast approaching toward completion At the press time, about 60% total office space has been committed

The building is estimated to complete in Q2/2013

An Phu Plaza, District 3

Lim Tower, District 1


As stock has been

absorbed

gradually, average

asking rent in both

Grade A and B

markets went up

slightly.

The market-wide

asking rent rose to

US$21.2 psm per

month, an increase

of 1.5% q-o-q.

HCMC OFFICE MARKET Q 4 H E A D L I N E S

0

50,000

100,000

150,000

200,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011 2012

$18

$20

$22

$24

$26

Net Vacant Space (

sm

)

Avera

ge A

skin

g R

eent U

S$ p

sm

per

month

Vacant Space Asking Rent

Vacant Space and Average Asking Rent – Grade A & B

Average Asking Rent


Rent increased softly

• Market continued to show the signs of bottoming as expected in the previous quarter. On

average, the asking rent across both Grade A and Grade B increased nearly 2%

• Mature Grade A buildings held firm rents while younger ones started to increase their asking

rent as their vacant space becoming limited.

• Grade B asking rent continued its soft upward trend in Q4; however at a slower increasing

pace (by 0.8% q-o-q, much lower than the recorded number of 1.4% q-o-q in Q3), due to new

supply in the review quarter.

Vacancy reduced gradually

• Average vacancy rate for both Grade A and B slide to 12.7 % in Q4, a drop of 0.6 percentage

points q-o-q.

Demand came from new entrants, company expansion and relocation

• Pharmaceutical, legal, and oils & gas still enjoyed wealthy budget and played a major role in

driving demand for new office spaces.

• Tendency of integrating offices in different locations into one location (as one anchor tenant) in

order to save cost.

HCMC OFFICE MARKET Q 4 R E V I E W


HCMC OFFICE MARKET 2 0 1 3 – F U T U R E S U P P L Y

President Place– D1

Grade A

Area: 9,100 sm NLA

Empress Tower– D1

Grade B

Area: 19,537sm NLA

Le Meridien – D1

Grade A

Area: 9,125 sm NLA

Lim Tower– D1

Grade A

Area: 22,000 sm NLA

Times Square– D1

Grade A

Area: 12,704 sm NLA

Target Handover

Q1/2013 Q2/2013


Given new launches of Empress Tower, President Place and Times Square,

average asking rent in either Grade A or Grade B segment will not be able to

maintain their upward trend in next few quarters

2013 is still the year of tenants

New supply mostly comes from delayed projects which construction has ben

renewed rather than from newly invested projects.

The market will not experience any significant movement in average rental rate as

what happened in the period 2008 -2010.

Pharmaceutical, education, legal and oil & gas continue to be the most active

groups of tenant in the market.

To retain the tenant lists, most landlords will provide higher incentives level rather

than lower their rental rate.

More tenant-benefits will be considered including longer fit-out period, free/reduce

parking fee and more flexible leasing terms and conditions, discount for upfront

payment, etc.

HCMC OFFICE MARKET O U T L O O K


HCMC RESIDENTIAL FOR SALE Q 4 / 2 0 1 2 M A J O R E V E N T S

October 2012 – Hoang Anh Thanh Binh

apartment developed by Hoang Anh Gia Lai

launched in District 7.

December 2012

– Star Hill

(Phase 2)

launched in Phu

My Hung NUA.

October 2012 – My Phu 3 villa in Phu

My Hung NUA officially launched.


NEW LAUNCH: kept decreasing

• Q4 /2012: 18.5% q-o-q; 16.1% y-o-y to 893 units;

• 2012: 72.8% y-o-y to 3,441 units;

• Mid-end segment: 57.8% of new launches in Q4;

• Others launches from already launched projects:

Leman CT Plaza, Sunrise City, Investco Babylon, Au

Co Tower , Harmona, 27 Truong Chinh, Ehome 3;

Stagnant market discouraged new developments;

Developers ‘refreshed’ projects by nominating trading

floors for launching/ marketing;

NEW COMPLETION:

• Q4/2012: 9.0% q-o-q; 14.1% y-o-y to 2,718 units;

• Mid-end segment made up the majority 56.7%;

Slow construction progress owing to lack of capital;

• 2012: 17.2% y-o-y to 9,508 units;

Results of completion delays in previous years;

Managed to complete to attract buyers.

HCMC RESIDENTIAL MARKET C O N D O M I N I U M S U P P L Y

Condominium Launch by Year

Q4 2012

Source: CBRE

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Condominium Completed by Year

Q3 2012

Q4 2012

Q3 2012

Source: CBRE

0

2,000

4,000

6,000

8,000

10,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


PRICES: Decreased across all segments

but NOT DIRECTLY as Q3:

• Price reductions through promotion, giving voucher,

overseas holidays, gold, lending rate support,

discount on upfront payment ;

MARKET SENTIMENT

• Concerned about partial construction, pushing

developers to continue construction;

• Pushing for best pricing causes developers and

secondary bulk buyers to slash prices;

• Most transactions at mid-end and affordable

segments true end-users;

• In the upper market: Most transactions at ‘branded’

property – good quality, from well-known developers: – Star Hill (P1): over 70%;

– Star Hill (P2): ~60% out of units launched;

• Currently, HCMC has ~28,000 unsold units

HCMC RESIDENTIAL MARKET C O N D O M I N I U M P R I C E

Condominium Asking Price Change

(q-o-q change)

Source: CBRE

-10%

-7%

-4%

-1%

2%

5%

2009 2010 2011 2012

Luxury High-end Mid-end Affordable

Unsold Units

Source: CBRE

0

5,000

10,000

15,000

20,000

25,000

30,000

2009 2010 2011 2012


“Branded” property remained a bright spot:

• Projects developed by well-known developer

and located in prime location still attracted

buyers;

• My Phu 3 launched by Phu My Hung Corp. in

early Q4 2012 and sold rate reported over 70%;

CT Group introduced its golf villas at the CT Sphinx

project in Cu Chi District;

Eastern districts (District 9 and Thu Duc)

continued to be silent;

• A price reduction of 50%-60% q-o-q reported at

a villa project in Thu Duc District;

No new completion reported;

Challenges ahead,

esp. those at less attractive location;

HCMC RESIDENTIAL MARKET L A N D E D P R O P E R T Y – Q 4 R E V I E W

Villa & Townhouse Supply by Year

Source: CBRE

0

200

400

600

800

1000

2004 2005 2006 2007 2008 2009 2010 2011 2012

Launched Completed

Source: CBRE

District 7

District 9

District 2

Thu Duc District

Others

Villa & Townhouse Completion by District


Unlikely to have significant turnaround in 2013 despite the Government’s efforts to rescue the

property market;

Finance to continue being developers / investors’ major challenges;

Price discounts with conditions to be continuing;

Delayed completions and transferring projects expected to continue throughout the year;

Expected major condominium launches in 2013:

More competition from developments in neighboring provinces (Binh Duong, Long An) in the

landed property.

HCMC RESIDENTIAL MARKET 2 0 1 3 O U T L O O K

Delta River Tower The Prince Residence Metro Apartment Ehome 3 (Phase 2)

District 1 Phu Nhuan District District 2 Binh Tan District

~182 luxury units ~233 high-end units 104 affordable units ~150 affordable units


HCMC SERVICED APARTMENTS Q 4 M A J O R E V E N T S

September 2012 – An Phu Plaza

(54 Grade B units) opened on Ly

Chinh Thang Str., D.3 and its sole

agent, CBRE, held the 1st Tenant’s

Night event in early December.

November 2012 – Q Residence

(60 Grade C units) opened on

Pasteur Street, D.3.

Fraser Hospitality came to HCMC and introduced

its new hotel residence brand - Capri by Fraser

@ District 7, HCMC (175 Grade B units), which is

ready to move in within January 2013.

October 2012 – The Ascott Limited won a contract to

manage the new Somerset Vista Ho Chi Minh City

(100 Grade B units) and Vista Residences (168 units).


Long regarded as

‘over-priced’, recent

sharp decline

(-9.3% q-o-q and -

14.5% y-o-y) in

Grade A asking

rents secured a

gain of 4.6

percentage points

q-o-q in its

occupancy.

HCMC SERVICED APARTMENTS Q 4 H E A D L I N E

Average Asking Rents (US$/sm/month)

Source: CBRE

00%

10%

20%

30%

40%

50%

60%

$20

$30

$40

$50

2007 2008 2009 2010 2011 2012

Grade A Vacancy Grade B Vacancy

Grade A Rents Grade B Rents

Average Asking Rent (US$/sm/month)


SUPPLY:

• Q4 welcomed two new serviced apartment projects:

• To keep established serviced recidences competitive,

landlords become more flexible with: – 10%-15% discount on asking rents and;

– Free car parking, daily breakfast or higher utility allowance.

ASKING RENTS:

• Though Grade B rent increased by 1.0% q-o-q after

continuously sliding for three quarters, it must be cautious

to say it’s the market’s bottom as Grade A rents saw a

sharp decline of 9.3% q-o-q.

• In line with the perception that ‘serviced apartments are

over-priced in HCMC’, Grade A rents are revising

downwards for 5 quarters in a row;

HCMC SERVICED APARTMENTS Q 4 R E V I E W

An Phu Plaza, District 3 Q Residence, District 3

Grade B, 54 units Grade C, 60 units

Operating by CBRE Vietnam Operating by Cushman & Wakefield

Avg. Asking Rent (US$/sm/month)

Source: CBRE

$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012

Grade A Rents Grade B Rents


VACANCY:

With consecutive decrease of Grade A rents, its vacancy

continued witnessing a larger decrease of 4.6 ppt q-o-q,

currently at 10.6%.

Grade B vacancy reported high (over 23%), due to the

continued new supply throughout 2012 and the fierce

competition from the buy-to-let substitutes.

DEMAND:

Tenants’ strategies seen in 2012 – Manufacturing

companies and international schools have been seen:

• Intergrating their expat staff into one serviced residence;

• Buying buy-to-let apartments in bulk for their expat staff

instead of separate housing packages;

HCMC SERVICED APARTMENTS Q 4 R E V I E W

Vacancy Rate (%)

Source: CBRE

0%

20%

40%

60%

2007 2008 2009 2010 2011 2012

Grade A Vacancy Grade B Vacancy


Budget

HCMC SERVICED APARTMENTS G U E S S P R O F I L I N G , C B R E 2 0 1 2 E N Q U I R I E S

Sizing

Stay Length Accommodation

41.1%

$1k-2k 50.0%

60-100sm

79.6%

6mth-1yr

56.2%

Asian

58.9%

Serv. Apt.


Projects kept delaying their grand opening and 2013 will see most-awaited launches, including:

2012 witnessed major ground-breaking ceremonies, with expected completion beyond 2014:

TREND OF NEW SUPPLY:

From the traditional core (the CBD) to the decentralised area (District 2 and District 7)

with an emerging expat community;

Will place more pressure on the current high vacancy;

International players (Fraser Hospitality, The Ascott Limited, Sedona Hotels International, Ritz

Carlton, Mapletree, etc.) will bring in world-class experience for a better-shaped market;

HCMC SERVICED APARTMENTS 2 0 1 3 O U T L O O K

Saigon Centre, Phase 2 The One Ho Chi Minh City Saigon South Place Complex

District 1, 200+ Grade A units District 1 District 7

Developed by Keppel Land

To be operated by Sedona Suites

Developed by Bitexco;

with its hotel to be operated

Developed by Mapletree and SCID. Its

retail, SC VivoCity Shopping Mall, broke

by Ritz Carlton ground in March 2012 and will generate

demand and foot falls for next phases

Capri by Fraser @ District 7, HCMC Somerset Vista Ho Chi Minh City Times Square

District 7, 175 Grade B units District 2, 100 Grade B units District 1, 78 Grade A units

Operating by Fraser Hospitality Operating by The Ascott Limited Developed by Times Square JSC


Opening of new economic zones

and industrial parks are halted. The

existing IPs are under pressure to

review its land usage and tenants’

implementation.

To attract more tenants, developers

at less favourable locations have

been forced to decrease rent

significantly.

Land rental rate in key industrial

parks remain steady or down slightly

compare to 1H2012.

Demand derived from expansion of

F&B, FMCG, and Electronics firms

such as Pepsi, P&G, Samsung and

Nestle.

VIETNAM INDUSTRIAL AND LOGISTIC 2 0 1 2 R E V I E W

$0

$200

$400

$600

$800

Q1/2007 Q1/2009 Q1/2011 Q4/2011 Q4/2012

Lowest Highest

SKER – Historical Land Rates, Key Industrial Parks

$0

$100

$200

$300

Q1/2007 Q1/2009 Q1/2011 Q3/2012

Lowest Highest

NKER – Historical Land Rates, Key Industrial Parks


Both international and local logistic service providers

are in expansion across the country (Schenker, DHL,

Kerry,… vs Tan Cang Saigon, Vinafco,…)

Third tier provinces such as Long An, Bac Giang,

Hung Yen,…continue attract traditional sectors like

garments, footware.

Electronics, F&B , and FMCG concentrate in second

tier cities such as Binh Duong, Dong Nai,…

First tier cities such as HCMC, Hanoi and Danang

capture majority share of the emerging industries

including R&D, labs, software development and

Business Processing Outsourcing.

VIETNAM INDUSTRIAL AND LOGISTIC 2 0 1 3 O U T L O O K


HCMC RETAIL Q 4 / 2 0 1 2 M A J O R E V E N T S

Pandora City

Opened November 2012;

Operating at 80% committed

occupancy;

Located in Tan Phu District The project

is unique in the surrounding area.

Vincom Center A

Opened on 10 Oct 2012;

Currently operates at 95% committed

occupancy

SC Vivo City

Ground breaking March 2012

Estimate GFA: 72,000 sqm

Estimate NLA : 46,800 sqm

Number of Floors: 1 basement & 5

levels

Estimate Completion: 1H 2014

PowerBowl 388


CBD shopping

centre’s average

asking rents

increased due to

Vincom Center

A’s participation .

HCMC RETAIL Q 4 H E A D L I N E S

0

5

10

15

20

25

0

20

40

60

80

100

120

140

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2009 2010 2011 2012

Vacancy r

ate

(%

)

Renta

l ra

te (

USD

/sm

/m

onth

)

Rental rate Vacancy rate

CBD Shopping centre

* All rents are quoted on NLA, exclusive of VAT and service charges

Source: CBRE


New supplies from Vincom Center A (District 1) and Pandora City (Tan Phu District) providing

78,000 sm retail GFA.

Taking advantage of prime location, Vincom Center A has asking rents of the ground and first

floor (USD135/sm/month ) higher than the average of CBD shopping centre

(USD122.7/sm/month), leading to an increase of 2.6% q-o-q in CBD shopping centre’s rental

rates. This rent is with a doubt to sustain in coming quarters. The non-CBD shopping centre’s

rents increased slightly 0.8% q-o-q.

Non-CBD department store’s rent increased 2.9% q-o-q thanks to the increase in Parkson

Hung Vuong, which has just changed layout and tenant mix last quarter. The deparment store

is now more refresh with new branded retailers namely Mango, Mo&Co, DFML, JS. From and

the new foodcourt in the sixth floor. CBD department store’s rent stayed stable during the

quarter.

Vacancy rate in department stores increased substantially in the review quarter, an increase of

5.5% q-o-q to 7.5% due to Parkson Flemington is struggling to attract tenants. Despite increase

in total supply, vacancy rate in shopping centres has stayed unchanged q-o-q, which is an

evidence to support retail demand with good location and careful project positioning.

In the fourth quarter of 2012, the market saw 57,719 sm GFA of space leased, almost 4 times

larger as compared to that of last quarter.

HCMC RETAIL Q 4 R E V I E W


More luxury retailers to enter the market as they expand across borders

New entrance: Takashimaya, Aeon, NTUC Fair Price, SC Vivo City, and Payless

Continued international-style retailing: fast-food chains set to expand

Subway has announced the plan to open 10 shops in 2013,

Burger King has had five stores by the end of 2012,

Lotteria and KFC both strive to have 200 shops in the next years,

Mc Donald, Starbucks and 7 - Eleven plan to enter Vietnam in 2013.

HCMC RETAIL

DEMAND


HCMC RETAIL

2013 OUTLOOK

F&B, daily necessities ,FMCG

and entertainment will continue

driving the market.

Vincom Center A: a strong

evidence to support the need

for prime retail space in District

1, HCMC;

With a good location, proper

tenant mix and layout, the

market can still absorb new

supply.

Source: TNS, The Changing Reality of Retail, Nov-2012

Monthly Household Expenditure


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Q 4 / 2 0 1 2 r e l e a s e d J a n 2 1 , 2 0 1 3

© 2012 CB Richard Ellis (Vietnam) Co., Ltd. This report has been prepared in good faith and with due care by CB Richard Ellis (Vietnam) Co., Ltd. We obtained some of the information above from sources we believe to be reliable. However, we have not verified the accuracy of the information which we obtained from other sources and make no guarantee, warranty or representation about it. We include projections, opinions, assumptions or estimates which are made with careful consideration of factors known to us for example only, and they may not represent current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis.

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ho chi minh city q4 2012 report

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