savills - hcmc market brief q3 2009 eng

Ho Chi Minh City, Vietnam Q3/2009

For further information, please contact:

vietnam – ho chi minh city Brett Ashton Managing Director +84 8 3823 9205 – Ext.116 [email protected]

vietnam - hanoi Matthew Powell Branch Director +84 4 3946 1300 – Ext.105 [email protected]

corporate website www.savills.com

address Savills Vietnam Ltd – Ho Chi Minh City 18/F, Fideco Tower 81-85 Ham Nghi , District 1 Ho Chi Minh City Vietnam T: +84 8 3823 9205 F: +84 8 3823 4571

address Savills Vietnam Ltd – Hanoi 13/F Pacific Place 83b Ly Thuong Kiet, Hoan Kiem Hanoi Vietnam T: +84 4 3946 1300 F: +84 4 3946 1302

This document is prepared by Savills for information only. Whilst reasonable care has been exercised in preparing this document, it is subject to change and these particulars do not constitute, nor constitute part of, an offer or contract, interested parties should not only rely on the statements or representations of fact but must satisfy themselves by inspection or otherwise as to the accuracy. No person in the employment of Savills has any authority to make any representations or waranties whatsoever in relation to these particulars and Savills cannot be held responsible for any liability whatsoever or for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. This publication may not be reproduced in any form or in any manner, in part or as a whole without written permission of the publisher, Savills.© Savills Vietnam Co., Limited. 2009

Office for lease

Supply Trends There are 37 office buildings of Grade A and Grade B standard in HCMC, accounting for approximately 475,000 square metres net office space.

In Q3 2009, the office market in HCMC has received one new Grade A supply - the Kumho Asiana Plaza with about 25,700 square metres net area. In total, the HCMC office market supply has received a slight increase of 5% compared with Q2 2009.

Grade No. of

Building Approx. Supply

Occupancy (%)

Average rent

Grade A 6 100,071 81% 63

Grade B 31 374,356 86% 30

Grade C 85 277,914 84% 22

Total/ Average 122 752,341 85% 32 rce: Savills Research & Consultancy, Q3 2009

t, inclusive of service

Performance of HCMC office market (all grades),

Sou

* Rents, in US$, are based on quoted rents and package necharge but exclusive of VAT (10%), payable monthly.

Q3 2008 – Q3 2009

0%

20%

40%

60%

80%

100%

Q308 Q408 Q109 Q2 09 Q309

%

0

10

20

30

40

50US$/sq m/mth

Occupancy Average Rent

Source: Savills Research & Consultancy, Q3 2009

he average rent for all districts and grades remained

emand Trends

k the demand for office space through the

ansactions have been from existing tenants

ok

uture Supply, 2009E – 2012E

Tunchanged in Q3 2009 while the average occupancy rate has increased slightly by 2% for all grades and districts. However, as Kumho Asiana Plaza was completed late in the quarter, Grade A has suffered a sharp reduction in occupancy of 15 percent.

D

racSavills is able to tnumber of inquiries we receive. There has been considerable fluctuation; however, this has been an upward trend since May 2008. In the latter part of Q3, Savills has seen a slight decrease in inquiries and is expecting this trend to continue into Q4 or until such time as another Grade B building is launched.

Most of the trcapitalizing on the reduction in rents with very few new comers to the market. Savills has seen a number of tenants returning to the CBD from suburban locations or upgrading to a better quality building due to the fall in rents making it affordable to move.

Outlo

tial FPoten

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2009E 2010E 2011E Potential

sq mFuture supply


w supply of more

they are still typically at the planning stage.

e could be total neSavills estimates that therthan one million square metres of office space to be completed in the next few years. Future supply will be mainly concentrated in District 1, accounting for nearly 60% of total future supply. Notably, there could be one more grade B building – Crescent Plaza – completed by the end of 2009.

future supply as at the end of 2009, 2010 andThe estimated2011 is expected to complete as all buildings have begun construction. For projects that are planned to be completed in 2012 and beyond, there may be some further delays since









Retail

Supply Trends Presently there are five department stores, 15 shopping centres, six retail podiums, 59 supermarkets, and three wholesale markets in the city with total area of approximately 452,400 sq m. This supply is considered small for a city with an estimated eight million people. The retail market in HCMC is in the infancy stage when compared to other regional markets. Quarter 3 2009 saw the re-opening of Lucky Plaza with no new stock during the quarter. Average rents in shopping centres, retail podiums and department stores in this quarter ranged from US$35 to US$140 per sq m. In general, rents have decreased slightly during Q3 2009. The highest rent was around US$220 per square metre. Occupancy in the retail market is approximately 96%, flat compared to Q2 2009. The Retail Market by Area, Q3 2009

Wholesale markets 11.3%

Retail Podiums1.3%

Department Store14.6%

Supermarkets 42.2%

Shopping Centres 30.6%


The Retail Market by Location, Q3 2009 CBD

18.8%

Secondary35.1%

Suburban46.1%


Demand Trends The foundations for predicted retail sector growth in HCMC appear evident such as rising GDP per capita and high consumption levels that have fuelled this market over the past few years. Demand has persisted into Q3 2009, but slowing GDP growth will have an impact on consumption and investment decisions in Viet Nam. In spite of slowing GDP growth, long-term prospects for retail are promising. In the first nine months of 2009, HCMC’s GDP grew at only 6.1%, but the total retail sales in HCMC increased by 18.7% compared with the same period last year. Savills expects a higher increase in retail growth when the economy recovers. Demand for international-standard retail space should rise in the coming 1-3 years, particularly in the central business districts, as Viet Nam is now obligated to provide equal legal treatment for domestic and international retailers as part of WTO accession. Therefore, from this point forward the retail sector in Viet Nam is open to 100% foreign ownership.

Outlook Potential Future Supply, 2009E – 2012E

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000


sq m

rce: Savills Research & Consultancy, Q3 2009

here is a shortage of supply of developed retail space in

Sou THCMC until 2011. However, the years from 2012 onward is clearly the one to watch, as supply and demand dynamics start to mature. The expected influx of retail supply may apply a downward pressure on both rents and occupancy levels. The majority of future supply will come from District 1 and District 7.









Hotel

Supply Trends There are 21 hotels from ‘4-star’ to ‘5-star’ in HCMC, totalling about 5,600 rooms and Savills observed that there was one new 5-star hotel entering the market in Q3 2009 – the Intercontinental Asiana Saigon. The majority of both 4 and 5-star hotels are located in District 1 accounting for 70% of the market.

Total hotel supply has not increased significantly in the last three years in HCMC. This has allowed 5-star hotels to achieve high room rates, whilst 4-star hotels have typically gained better occupancy rates than 5-star hotels. Performance of HCMC hotel market (4 & 5-star) in Q3 2009

Grades No. of Hotels

Approximate No. of Rooms

Average Occupancy

(%)

Average Room Rate*

(US$/room/night)

5-star 13 4,200 50 117

4-star 8 1,300 54 72

Source: Savills Research & Consultancy, Q3 2009 * Estimated average achievable room rate inclusive service charge and breakfast, exclusive of VAT. Revenue per available room (RevPAR), Q3 2008 – Q3 2009

RevPAR(US$)

0

20

40

60

80

100

120

Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009

5-star 4-star 4 & 5-star rce: Savills Research & Consultancy, Q3 2009

been affected by the global economic ownturn. During the first nine months of 2009, international

ietnam’’ program organized by VNAT*, Viet

uture Supply, 2010E – 2012E

Sou

evPAR has increased slightly over the last quarter due to Rbetter occupancy resulting from domestic travellers, as well as promotional programs. RevPAR for 4 & 5-star hotels in Q3 2009 is around US$49, a decrease of over 35% compared to Q3 2008. Whilst RevPAR for the top 5-star hotels in Q3 2009 was around US$65, a decrease of 30% compared to Q3 2008.

Demand Trends Demand has clearlydvisitors to HCMC only reached 1.95 million persons, decreasing by 11% compared to the same period last year.

Business visitors to HCMC decreased 12% compared with Q3 positive in these difficult times given2008. This is relatively

that business visitors are the main target market for the 4 and 5-star hotels.

Furthermore, as a result of the government’s stimulus and the ‘’Impressive VNam’s economy is slowly recovering. Viet Nam is expected to receive 4.3 million international visitors in 2009, according to VNAT.

* Viet Nam Administration of Tourism

Outlook Potential F

No. of rooms

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2010E 2011E Potential

Source: Savills Research & Consultancy, Q3 2009 Based on future projects, there approximately 2,700 four &

in the next few rate in District 1

ich may lead to project

are five-star rooms expected to enter the marketears. Future supply will continue to concenty

and furthermore there appears a considerable investment interest in the luxury hotel market. However, economic woes in Q3 2009 and for the foreseeable future have probably had a negative impact on the financial apacity of many developers, whc

delays.









Apartment for Sale

Supply Trends

There were approximately 5,620 apartments available for sale in the HCMC primary market in Q3 2009, which was a significant increase of about 55% compared with the number of apartments on the primary market in Q2 2009. Grade C apartments contributed about 75% of the total supply on the HCMC primary market in Q3 2009. The new supply has been focused on Grade C apartments in 2009 and this trend could continue in the next year. The main supply in the primary market came from District 8, District 7, and District 2; these three districts accounted for more than half of the primary supply. In Q3 2009, there were approximately 41,500 apartments, an increase of 4% compared with Q2 2009, in HCMC’s secondary market. District 2, District 7 and Binh Thanh District continued to be the main suppliers in the secondary market and accounted for about 50% of the secondary supply.

Primary market in Q3 2009

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Grade A Grade B Grade C

Units

0

500

1,000

1,500

2,000

2,500

3,000US$ per sq m

Primary supply in Q3 2009 # of units sold in Q3 2009 Average Primary Price

Source: Savills Research & Consultancy, Q3 2009 Demand Trends In the third quarter of 2009, the average primary price (VAT excluded) of the HCMC apartment for sale market was approximately US$1,200 per square metre, about a 30% decrease compared with the average primary price in Q2 2009. The price stumbled substantially because the majority of transactions came from low price Grade C apartments. Out of the 5,620 apartments available for sale in the primary

market, about 43% of the primary supply was absorbed in Q3 2009. At present, there is some short term over supply in the HCMC apartment for sale market. Overall, Savills believes that the secondary apartment for sale market reached its bottom in Q2 2009 from the economic downturn in the second half of 2008. The average asking secondary price in Q3 2009 went up in most of the districts; however, the number of transactions seemed to remain low. Savills expects a continued steady improvement in the apartment market over the next six months as confidence returns and new projects are launched. Outlook About 87 planned projects are expected to come to the market in the next three years (2010 - 2012). If these planned projects arrive on schedule, the total supply of apartments for sale would double. District 7, exploiting the advantage of the Phu My Hung new urban town, contributes about 26% of HCMC’s future supply.

District 2 and District 9 have the advantage of an improving transportation system, their available land supply and the presence of a Hi-tech industrial park in District 9 that is being developed. These two districts could be the main suppliers for the HCMC apartment for sale market in the mid-term and accounts for about 25% of HCMC’s future supply over the next three years. Expected future supply in the HCMC market by year

0

5,000

10,000

15,000

20,000

25,000

30,000

2010E 2011E Potential

Units

0

5

10

15

20

25

30

35

40

45Projects

# of planned units # of planned projects




Vietnam – ho chi minh city Brett Ashton Managing Director +84 8 3823 9205 – Ext.116 [email protected]

Vietnam - hanoi Matthew Powell Branch Director +84 4 3946 1300 – Ext.105 [email protected]


Address Savills Vietnam Ltd – Ho Chi Minh City 18/F, Fideco Tower 81-85 Ham Nghi , District 1 Ho Chi Minh City Vietnam T: +84 8 3823 9205 F: +84 8 3823 4571

Address Savills Vietnam Ltd – Hanoi 13/F Pacific Place 83b Ly Thuong Kiet, Hoan Kiem Hanoi Vietnam T: +84 4 3946 1300 F: +84 4 3946 1302


Serviced Apartment

Supply Trends Savills research concludes that there are 48 buildings in grades A to C, comprising 2,666 internationally and locally managed serviced apartments for lease in HCMC. Nearly half of those apartments are two bedroom units and mainly disbursed in the Central Business District (District 1 and District 3) which represents about 67% of the serviced apartment market.

Grade No. of

Buildings Approx.

Supply (Unit) Occupancy

(%) Avg. Rent*

(US$/sq m/mth)

Grade A 7 658 64% 27

Grade B 11 1,272 94% 24

Grade C 30 736 90% 16


* Estimated average rent inclusive service charge, exclusive of VAT, on a net area basis. Performance of Serviced apartments (All Types), Q3 2008 – Q3 2009

-

500

1,000

1,500

2,000

2,500

3,000

3,500

Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009

Units

15

18

21

24

27US$/ sq m/ month

Leased Vacancy Avg Rent

Source: Savills Research & Consultancy, Q3 2009 The market witnessed the entrance of Intercontinental Asiana Saigon with a total of 260 apartment units – the first new supply since 2005. This is equal to about 10% of the total market, as a result total occupancy in the serviced apartment market in Q3 2009 is significantly lower than in the last few years. Occupancy of Grade A serviced apartments is down 12 percent. The average rental rate in Q3 2009 is down 7% with the largest change occurring in Grade C.

Demand Trends In Q3 2009, the demand for serviced apartments has shown a slight increase. It is predicted to remain relatively stable for the next few years and increase with Viet Nam’s continued integration into the global economy. The demand is supported by continued foreign direct investment with the top six countries being Korea, Singapore, Japan, the US and Taiwan. Outlook Future Potential Supply, 2009E – 2012E

0

200

400

600

800

1000


Unit

Source: Savills Research & Consultancy, Q3 2009 Some additional new supply is due to be launched in the last quarter of this year. The Crescent is expected to launch the first Phase of about 120 units in the next quarter. The entrance of the Crescent in the next quarter is likely to create a negative impact on existing projects’ rents and occupancy levels. In addition, the Crescent will launch an additional 170 units in the first half of 2010.

savills - hcmc market brief q3 2009 eng

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