MARKET INSIGHTS - CBRE Vietnam€¦ · THANH XUAN HAI BA TRUNG HOANG MAI HUNG YEN DONG ANH DAN...

CBRE RESEARCH & CONSULTING MARKET INSIGHTS From CBRE’s Hanoi Quarterly Report

Q3 2013

2 MARKET INSIGHTS FROM CBRE’S HANOI QUARTERLY REPORT | Q3 2013

Q3 2013 Economic Overview

ECONOMIC OVERVIEW

Q3/2012 Q2/2013 Q3/2013

GDP (% y-o-y) 5.1% 4.8% 5.1% nh

CPI (% y-o-y, e-o-p) 6.5% 6.6% 6.3% ii

Exchange rate (USD/VND, e-o-p) 20,828 21,036 21,036 hn

Export (US$ Bn) 30.7 29.7 34.9 hh

Import (US$ Bn) 29.9 29.2 34.1 hh

FDI Registered (US$ Bn) 3.1 4.3 4.5 hh

FDI Implemented (US$ Bn) 2.7 2.7 2.9 hh

International Tourist Arrivals (million arrivals) 1.5 1.8 2.0 hh

Retail and Services Turnover (tril. VND) 575.7 636.1 656.6 hh

FDI: Foreign Direct Investment

Y-o-Y: year on year

E-o-p: end of period

“VND to devaluate up to 2% by year end” Mr Prime Minister Nguyen Tan Dung


Gold and Bank Deposits Become Less Attractive, Stock Market Recovers

ECONOMIC OVERVIEW

Gold price movements Regional stock market

Indicators 2013

Gold price

•Global gold price (US$, e-o-p) 18.1% YTD

•Gold price (SJC, US$, e-o-p) 19.7% YTD

Deposit rates 200 bp YTD

1,000

1,200

1,400

1,600

1,800

2,000

30

34

38

42

46

50

12/2011 03/2012 06/2012 09/2012 12/2012 03/2013 06/2013 09/2013

Glo

bal gold

price (

US$

)

Local gold

price (

VN

D m

illion)

LOCAL GOLD GLOBAL GOLD

Vietnam stock market

Real Estate Index 2Y 1Y 6M 3M 1M Current

Real Estate Holding &

Development Listed

Companies

43.8 45.6 46.2 42.2 41.5 41.2

Real Estate Services

Listed Companies 56.7 44.4 27.8 24.3 21.1 19.8


LEGISLATION HIGHLIGHTS

Supporting legislation from the government:

Draft/ revised Housing Law: allowing foreign

individuals to buy property in Vietnam;

Submitted draft on raising ceiling for foreign

ownership ratio in listed companies from 49% to

60%;

Foreign ownership in local banks to increase to

49% from the current 30% in a near future,

according to the PM;

Single visa for tourists to Vietnam, Thailand and

Cambodia.

The Government is listening


What are the possibilities?

FOREIGN OWNERSHIP OF PROPERTIES IN VIETNAM

• Currently in the form of a pilot scheme

• Resolution 19/2008

• Limited eligibility and complicated procedures led to a total of only 126 foreign buyers to date, out of approximately 80,000 expatriates in Vietnam

Current legislation

• Introduces more open policies to foreigners buying properties in Vietnam, including:

• Wider asset class: both apartment and landed homes (of <500 sqm land)

• Eligibility requires as little as a 3-month visa for foreigners

• Right to sub-lease allowed

• Holding terms of 50 + 50 years or 70 years

Proposed Legislation


Limitations


• What happens after the leasehold period expires?

Leasehold terms would be a concern

• Thailand:

• Singapore and Hong Kong: Foreigners can buy private condominiums freely although they are subject to 15% additional buyer's stamp duty.

Several countries in the region allow freehold ownership although with conditions applied

o Foreign buyers can buy freehold for up to 49% of a single development, if this is

exceeded, tenure will be leasehold.

o Foreigners can buy land as a leasehold, whereas the improvements (residence)

can be freehold.

More attractive, but might not be attractive enough?

Assuming the foreigner could/ would have to transfer to a Vietnamese who would get

permanent ownership right, but this is not explicitly stipulated in the proposed legislation


If the Proposed Legislation is passed?


What would they buy?

Residential homes

Second homes

Who would buy properties?

Overseas Vietnamese

Expatriates

Overseas investors

Impact to the Real Estate market

Potential source of demand

especially for the upper end

segments

BUT

Even if approved, this will not be a

quick fix to existing problems

Why would they buy?

For residence

(permanent and holiday)

For investment (for lease or

capital gain)


STRONG INCREASE IN FDI 2013YTD

US$15bn registered in first 9 months, up 36% y-o-y

0

40

80

120

160

0

100

200

300

400

500

600

700

2009 2010 2011 2012 2013pro

jects

US

$ m

il.

FDI Registered Capital Projects

FDI flow, Hanoi FDI flow, Vietnam

FDI to Hanoi increased sharply in Q3/2013; registered up 170% q-o-q and 58% y-o-y

The number of projects increased 140% q-o-q and 264% y-o-y

Key FDI projects in 2013 include Samsung Electronics (Thai Nguyen) and Tokyu (Binh Duong)

0

100

200

300

400

500

600

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2009 2010 2011 2012 2013

pro

jects

US

$ m

il.

FDI Registered Capital Projects


• Construction to start in October and completed by August 2014

• Samsung’s first factory in Vietnam operational since 2009 in Bac Ninh

Case Study: Samsung Group is to build its second factory worth a combined total of US$3.2bn in Thai Nguyen (north of Hanoi)

• Proximity to Hanoi and access to the border and ports • Existing and quickly developing infrastructure

• Low cost labor

• Tax breaks

• Other favorable policies

Why Thai Nguyen ?

• Inexpensive labor for Samsung

• Low tax rates as qualified as a Process–Export Zone

• Expected to trigger further foreign investment into Vietnam through suppliers and affiliates and downstream businesses

• Total sales revenue in the range of US$20 bn for two factories

• Job placement for local people

• Trigger for growth of other industries, including urban development

Win-win ?

STRONG INCREASE IN FDI 2013YTD

Focus on manufacturing


IZ: Industrial Zones

LOCATION, INFRASTRUCTURE AND FACTORIES

1

2

3

4

5

6

7

10

11

8

12

9

13

TU LIEM

CAU GIAY

HA DONG

HOAI DUC

THANH TRI

CHUONG

MY

THANH OAI

GIA LAM

LONG BIEN

TAY HO

BA DINH

DONG DA

THANH XUAN

HAI BA TRUNG

HOANG MAI

HUNG YEN

DONG ANH DAN PHUONG

HOAN KIEM

19 18

15

20

16

Nhat Tan Bridge

Timeline: 2009 - 2014

Status: 54% by Feb 2013

Thang Long Bridge

Status: Completed

Tu Lien Bridge

Status: Under Planning Chuong Duong Bridge

Status: Completed

Thanh Tri Bridge

Status: Completed

Vinh Tuy Bridge

Status: Completed Phase 1

Phase 2: 2012 - 2014

Me So Bridge

Status: Planning

1

2

3

4

5

6

7

RR4

Timeline: 2010 - 2020

Status: 1/500 planning

RR2 Expansion

Timeline: 2012-2015

Status: Allocation budget,

site clearance

Start: Q1/2012

RR3

Status: Completed

Elevated RR3

Status: Completed

RR5

Timeline: 2015 – 2030+

Status: planning by 2015

Elevated RR2

Timeline: 2013 – 2016

Status: Delayed

9

10

8

11

13

12

14

17

BRIDGE

OVERPASS

ROAD

LEGEND

The new Hanoi – Thai Nguyen Highway No. 3 is being completed

• Width of 34.5m; Design speed of 100kph; Total length of 63km from Hanoi through Bac Ninh to

Thai Nguyen, open for traffic in December 2013, delayed from June, funded by Japanese ODA

Nhat Tan Bridge is scheduled to complete late 2014, providing additional access from

Hanoi center to the northern provinces of Hanoi including Thai Nguyen

Factories need to be

located in industrial

zones where they can:

• Utilize low-cost labor

• Efficiently transport to and

from major cities

• Efficiently transport to and

from target market / export

zone / border and ports

Samsung

Samsung


What other infrastructure will be required?

INVESTMENT EXPANSION IN MANUFACTURING

Samsung’s factory in Bac Ninh

38,000 employees

Groceries: Market / Super market

F&B and Entertainment

Schools &

Medical facilities

Accommodation: Apartments,

Dormitory, Hotel

Investment in ancillary

facilities and services to

follow suit

• Residential facilities

• Commercial facilities

• Hotel & serviced apartments

Samsung’s upcoming factory in

Thai Nguyen will also employ

30,000 – 40,000 employees

This suggests large room for

growth in ancillary facilities to

serve the need of these factories,

not limited to Samsung

Affiliated

businesses

and supplier

industries


Highlights

CONDOMINIUM FOR SALE

Same, same but different…

Cautious new launches while primary prices still on the decline;

BUT

Strong new completions and secondary prices seem to stabilize q-o-q;

AND

High-end projects in demand again!


0

3,000

6,000

9,000

12,000

15,000

18,000

21,000

2007 2008 2009 2010 2011 2012 2013YTD

Q1 Q2 Q3 Q4 Whole year

0

5,000

10,000

15,000

20,000

25,000

2007 2008 2009 2010 2011 2012 2013

Q1 Q2 Q3 Q4 Whole year

CONDOMINIUM FOR SALE Primary market – Developers still heavy on discount pricing

New Launch Supply (Units) New Completion Supply (Units)

Primary prices (US$ psm)

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012 2013YTD

Below $1,000 psm $1,000-$1,250 psm

$1,250-$1,500 psm Above $1,500 psm

- Launch of Hoang Thanh Tower, the first

Luxury launch since Q2/12

- Primary asking prices lowered by 10%

from previous launch, or up to 50% of

original launch

- Much better apartment sales than Q2,

esp. units priced below US$750 psm and

above US$2,000 psm

YTD

6%

q-o-q

150%

q-o-q


CONDOMINIUM FOR SALE Secondary market – Prices are flattening out

Q-o-Q Secondary Price Change

Active sales in Upper-end of the market:

US$2,000 psm ++

- Newly-handed over; AND

- Good quality; AND

- Providing a vibrant and modern lifestyle

-6%

-2%

2%

6%

10%

14%

2009 2010 2011 2012 2013YTD

Secondary prices still on downward

trend, reduction:

- at a much more moderate level

- almost at the same level as the start of

the market-downturn (early 2011)

Affordable price point?

OR

Good value for money?


CONDOMINIUM FOR SALE

More activities in High-end segment: upcoming

launch of D.’ Le Pont D’or and The Manor Central

Park

Discount on primary prices: to continue, but with

limited success without proven quality of product: • Good construction progress

• Pre-committed supporting facilities & services

Transactions: occur at any price level (low to high

price points), as long as the product is good value

for money • Transactions: more likely to occur in completed or

near-completion units, since product value can be

more easily ascertained

The market is changing for the better: • Exit of inefficient/inexperienced developers;

Strengthening of the professionals

• Benefit to buyers overall in the form of better quality

products & services

Market Evolving Condo – A modern lifestyle

Shanghai

Bangkok

Hanoi


CONDOMINIUM FOR SALE Notable projects

D’. Le Pont D’or

Hoang Cau Str., Dong

Da District

By Tan Hoang Minh

~ 308 High-end condos

Proposed price:

US$1,650 psm

The Manor

Central Park

Hoang Mai &

Thanh Tri District

By Bitexco

~ 7,000 High-end

condos

Hoang Thanh Tower

Mai Hac De, Hai Ba Trung

Dist.

By Hoang Thanh

~ 187 Luxury condos

Price: From US$4,000 psm


Active launches of finished products by local developers—a new trend compared to ―silent‖ launches

that prevailed previously

• Examples include Sudico, Viglacera

• Products offer smaller sizes 75-120 sqm under VND4bn per unit

• Prices offered by the developers are typically lower than current secondary prices

• Market not ―frozen‖ in these actively marketed projects

Average secondary prices seem to be flattening out.

M&A between local developers: FLC acquired Alaska Garden City of 8ha in Tu Liem dist for VND300

bn (US$14mil); more M&A activities expected

Local developers more active in marketing projects

LANDED PROPERTY

Average secondary prices of villas (VND mil per sqm, land area basis)

-20%

-10%

0%

10%

20%

30%

40%

50%

0

20

40

60

80

100

120

140

Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313

Millions V

ND

per

sqm

Market Average Price Average Price Change


New supply Q3 2013

OFFICE

West Midtown Other locations

63 Le Van Luong

GFA: 9,300 sqm

PVI Tower

GFA: 54,000 sqm

The Lancaster Hanoi

GFA: 4,872 sqm

Royal City

GFA: 19,000 sqm

Four Grade B buildings completed in Q3 2013,

supplying approximately 90,000 sqm


OFFICE Grade B occupancy decreased due to new supply

Office Asking Rents Office Vacancy

0%

10%

20%

30%

40%

50%

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

2009 2009 2010 2011 2012 2013

Grade A Grade B

ASKING RENT

Grade A average asking rents decreased by 2.8% q-o-q while Grade B improved slightly by 1.5%

Grade A asking rents downward pressure as Landlords are more competitive to attract and retain

tenants

On y-o-y basis, Grade B asking rents decreased by 14%. Grade B asking rents to also face downward

pressure as more supply comes online

VACANCY

Grade A vacancy rate continued to decrease 2.45 pp q-o-q to 26.31%

Grade B vacancy increased 4.5 pp q-o-q to 34.7% due to the new supply of 4 grade B buildings

On y-o-y basis, Grade A vacancy decreased 1.16 pp while Grade B increased sharply 15.5 pp

$0

$10

$20

$30

$40

$50

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

2009 2010 2011 2012 2013

Grade A Grade B


OFFICE

CBRE deals breakdown - by industry CBRE deals breakdown – by origin

Major occupiers FLIGHT TO QUALITY and CONSOLIDATION taking advantage of available

opportunities in new buildings

The decentralizing trend has continued as the city cant supply large floor plates in combination

with higher asking rents in CBD… many examples of key relocations

High demand remains from tenants in financial sector, construction and electronics

Tenant movement

76%

24%

Foreign

Local

8%

31%

10% 10%

6%

35%

Manufacturing/Engineering

Finance/Banking/ Trading/Insurance

Construction/Real estate

Elecitricy/Technology

Pharmaceutical

Others


OFFICE

2014, approximately 210,000 sqm of office supply will enter the market with Lotte Center Hanoi the

most significant development (65,000 sqm GFA)

Office market will remain active for both Grade A & B due to rising supply and steadily increasing

demand as tenants have increased occupancy options providing cost savings/better

quality/expansion

Tenants have bargaining power and control

Asking rents in mature buildings with quality asset management services will remain competitive

even though there will be additional new supply in the next few quarters as demand for high quality

and good location office space continues.

Outlook Hanoi office supply forecast (Grade A & B), GFA sm – 2013++

0

5

10

15

20

0

200,000

400,000

600,000

800,000

2013 2014 2015 and onwards

Num

ber

of pro

jects

Futu

re o

ffic

e s

upply

(sm

)

Site Clearance Under Construction Under Planning Number of Projects

Q4


Upcoming in Q4 2013

OFFICE

APEX TOWER

Lot HH3, Me Tri NUA, Tu Liem

GFA: 21,000 sm

Expected completion: Q4/2013

HANDICO TOWER

Me Tri NUA, Tu Liem

GFA: 29,040 sm

Estimated completion:

Q4/2013

PSID TOWER

148 Hoang Quoc Viet

GFA: 10,634 sm

Expected completion:

Q4/2013

TIMES CITY

250 Minh Khai

GFA: 15,500 sm

Expected completion:

Q4/2013

EVN TOWER

11 Cua Bac

GFA: 18,194 sm


RETAIL Market Snapshot

Vincom Mega Mall – Royal City opened, a combination of shopping, F&B

and recreation setting a new trend in Hanoi’s retail market

MIPEC Shopping Center closed; Lotte Mart has taken occupation… under

renovation


RETAIL Big retail developers reinforce positions

Vincom

MegaMall

Vincom MegaMall Royal City:

Committed rate: 95%, actual

occupancy: 80% at opening

date

Offering vast variety of

products & services at a wide

price points

Ideal place for kids and family

One-stop-shop of F&B,

entertainment and shopping

Co.opMart

Listed among top 500 Asian

retailers

The 2nd Co.op shopping

center will be opened in Q4

2013 in Hanoi, supplying

10,000 sqm retail area.

Singaporean retailer,

Fairprice - and Saigon Co.op

get approval for commercial

joint-venture and will open 2

supermarkets named

Co.opXtra and Co.opXtraPlus

Lotte Mart

4 Lotte Marts have been

opened in HCMC, Dong Nai

and Da Nang

5th Lotte Mart to open in

Q1/2014 of 20,000 sqm in

Mipec Tower

Lotte Mart in B1 of Lotte

Center Hanoi expected to

open in Q2/2014

Plans to open 60

supermarkets in Vietnam by

2020


RETAIL Average rents declined while occupancy strengthened

Retail Ground Floor Asking Rents Retail Vacancy

AVERAGE RENTS DECLINED Q-O-Q IN BOTH CBD AND NON CBD AREAS (EXCLUDING ROYAL CITY)

Shopping centers: Rents dropped 2% in the CBD and 1% in non-CBD in existing projects (BUT increased

23.7% in non-CBD when including Vincom Mega Mall – Royal City)

Department store: Rents declined 1.8%, due to lower rents at Parkson Keangnam

Retail Podium remained stable.

VACANCY DECLINED 3% Q-O-Q AND 2% Y-O-Y

Shopping centers declined 4% q-o-q, partly due to high occupancy rate at the new center—Vincom

Royal City.

Retail lobbies increased sharply by 9% q-o-q.

Department stores slight increase 2% q-o-q and sharp increase 18% y-o-y.

$0

$20

$40

$60

$80

$100

$120

2007 2008 2009 2010 2011 2012 2013Q3

CBD non-CBD

0%

5%

10%

15%

20%

25%

30%

2008 2009 2010 2011 2012 2013 Q3

CBD non-CBD


RETAIL Food & Beverage in high demand

Tenants

519 stores opened while 220 stores closed in

shopping centers

Tenants moved from closed projects to new

shopping centers

33% of shops opened are F&B

Consumers

According to TNS survey: Education,

Healthcare, F&B and personal care are four

categories expected to see more spending.

Consumer spending intention

Source: TNS, CBRE

0% 20% 40% 60% 80% 100%

Education

Health care

F&B

Personal care

Household utilities

Household care

Entertainment & dinning out

IT

Household furniture

Transportation

Communications

More Same Less

Shops Opened and Closed Consumer Spending Intentions

31%

5%

33%

2%

13%

4% 0% 2%

7% 1% 2%

36%

14% 14%

9%

8%

8%

6% 3%

2%

31%

5%

33%

2%

13%

4%0%2%

7%

1%2%

Fashion Cosmetic F&B

Jewelry Furniture Electronics

Supermarket Other Kids

Equipment Service Entertainment


McDonald’s to enter Vietnam’s market 2014

Starbucks and Burger King to continue their expansion plan in Vietnam /

Hanoi

Foreign retailers continue to eye Vietnam as future supply increases

RETAIL

French Auchan, one of the world's largest hypermarket chains, is considering

channeling US$500 mil into Vietnam in the next 10 years for its own retailing

network

Future supply anticipated up to end of

2013: 400,000 sqm from 9 projects.

Upcoming projects in next 6 months

• Times City Phase 1 of 130,000 sqm

• Ocean Mall of 18,000 sqm

• Ho Guom Plaza of 10,300 sqm


SERVICED APARTMENT Market Highlights

Rents on a downward trend while operators compete for occupancy

Decentralized serviced apartments in demand


Historical Vacancy & Supply

SERVICED APARTMENT

Occupancy: gain for self-managed projects

• Self-managed group: 82.2%, up from 80.6%, their

prices are more competitive

• International operator groups: down 1% to 87%

Asking rents: down in both groups both y-o-y and

q-o-q

• Projects with branded operators down 2.89% q-o-q

and 3.88% y-o-y

• Self-managed projects down 3.35% y-o-y

Rents on a downward trend while operators compete for occupancy

Average asking rents (US$/sqm/month)

Elegant Tay Ho Fitting out

$0

$10

$20

$30

$40

$50

$60

2007 2008 2009 2010 2011 2012 Q3/2013

International Operator Self-managed Average

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0%

5%

10%

15%

20%

25%

30%

2007 2008 2009 2010 2011 2012 Q3/2013Supply Vacancy rate


SERVICED APARTMENT Budgets trending down

Term of contract Budget

4%

92%

4%

6 months - 1 year

1 year - 2 years

over 2 years

18%

55%

13%

7%

7%

< $1,000

$1,000 - $2,000

$2,000 - $3,000

$3,000 - $4,000

Over $4,000

DEMAND

Clients’ budget continued to decrease by approximately 10%

Serviced apartments in decentralized locations in demand due to new office clusters and competitive price

ranges

New FDI projects expect to generate new demand for serviced apartments on the edge of the city

Clients’ preferred contract terms of 1-2 years with most popular budgets of US$1,000-US$2,000

OUTLOOK

Upcoming serviced apartments in Q4 2013: Elegant Tay Ho, 140 units

Developers consider changing condominiums into serviced apartments

Supply expansion anticipated in Tay Ho area


HOTEL Highlights

RevPAR improved y-o-y but at the cost of lower ADR

Dai Duong Hotel (3 star), Hai Ba Trung Dist, temporarily closed

Three new projects recognized by the VNAT as 3-star hotels

No new supply during the quarter


HOTEL

Two major 5-star hotels to open in Q4 2013

Total supply to increase 10% by year end

Demand still looks strong but with limited budgets

• First 9 months of 2013, international arrivals to Hanoi reached 1.36 million,

increased 20.1% y-o-y. Number of domestic visitors rose 11.3% y-o-y.

JW Marriott, 450 rooms

Hanoi Landmark, 359 rooms ?

T +84 4 2220 0220

F +84 8 2220 0210

[email protected]

Every week – NEWSPAPER UPDATES

Every month – DASHBOARD

Every quarter – QUARTERLY REPORT

At CBRE, we live and breathe

the business of real estate

© 2013 CBRE (Vietnam) Co., Ltd. This report has been prepared in good faith and with due care by CBRE (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 CBRE clients, and cannot be reproduced without prior written permission of CBRE.

RICHARD LEECH

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MARKET INSIGHTS - CBRE Vietnam€¦ · THANH XUAN HAI BA TRUNG HOANG MAI HUNG YEN DONG ANH DAN...

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