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CBRE | Market View | Sept 2012
Software, IT and BPOIndustrial Real Estate Perspective
Presented by: Hieu Le, Senior Manager, Industrial & Logistics ServicesSeptember 20th, 2012
CBRE | Market View | Sept 2012
AGENDA
OPPORTUNITIES
WHO / WHERE / WHY
TRENDS
DRIVING FACTORS
Q&A
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CBRE | Market View | Sept 2012
CONCENTRATION MAPIndustrial Park – Export Processing Zone - Hi Tech Park – Economic Zone
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CBRE | Market View | Sept 2012
Migration of business functions occur for numerous reasons; increased confidence in pairing high value operations with domestic labor is high among numerous industry sectors
Sample Business Functions
• Accounting• Human Resources• Administration (e.g.
Payroll)• Information
Technology• Customer Support
(e.g. Call Centers)• Product Development• Research and
Development• Production• Marketing
• Better utilization of labor• Lower labor costs and
labor availability• Favorable tax rates and
tax incentives• Cultural affinity to base
company• Quality of training and
education• Strong government
support• Stable business /
political environment
Right-Shoring Rationale
BPO – IT OUTSOURCINGOpportunity
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CBRE | Market View | Sept 2012
BPO – IT OUTSOURCINGOpportunity
Onshore Nearshore Offshore
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CBRE | Market View | Sept 2012
BPO – IT OUTSOURCINGMarket Share
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CBRE | Market View | Sept 2012Growing Growing fast Origin of the biz
BPO – IT OutsourcingVelocity and Volume
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CBRE | Market View | Sept 2012
A.T.Kearney Top 20 countries in 2011
BPO – IT OUTSOURCINGRanking
• Government support / financial incentives / grants play important factor in creating a conducive environment.
• Labor market and language skill drive location decision
• Salary costs once the primary driving factor behind offshore location decisions; increasingly this is balanced with skill set and language availability
• Asia dominates the top 10 positions on the GSLI. The different strengths of these countries vary from India, with a deep and broad skill base, to Vietnam, which ranks as the most financially competitive country in the Index.
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CBRE | Market View | Sept 2012
BPO – IT OUTSOURCINGRankingHochiminh City ranks 17 and Hanoi ranks 21 in Tholons ‘s report on top 100 global outsourcing cities
Source: Vietnam ICT Outlook 2012
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CBRE | Market View | Sept 2012
BPO – IT OUTSOURCINGRanking – Financial attractiveness
Source: A.T. Kearney Global Services Location Index, 2011
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CBRE | Market View | Sept 2012
BPO – IT OUTSOURCINGRanking – People skill & availability
Source: A.T. Kearney Global Services Location Index, 2011
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CBRE | Market View | Sept 2012
Key Functions being outsourcedData Management
Financial Modeling & Analysis
Human Resources
Risk
Legal
Key DriversCost minimization to remain competitive
Cheaper cost of capital
Efficient management of data
The need to increase productivity (e.g. work can be performed across time-zones)
Closer integration with targeted markets
ResultsCost effectiveness
Centralization of function
Right labor pool and availability
Lower attrition rate
Diminished portfolio exposure
BPO – IT OUTSOURCINGSectors – Financial and Insurance
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CBRE | Market View | Sept 2012
Key Functions being outsourcedHuman Resources
Research & Development
Support Centers
Training Facilities
Key DriversCutting costs to remain competitive
Risk management
Management of talent
Hyper-competition
ResultsImproved focus on core operations
Support business growth
Economies of scale
Right labor pool and availability
Improved financial flexibility
BPO – IT OUTSOURCINGSectors – IT and High Tech
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CBRE | Market View | Sept 2012
Software
BPOOutsourcing
Telecom
DataServices
Digital Content
BPO – IT OUTSOURCINGSectors – IT and High Tech – Vietnam
Spill over effects: BPO and IT Outsourcing projects, especially from financial and insurance sectors, create demand for data
center owners and builders and other related industries.
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CBRE | Market View | Sept 2012
BPO – IT OUTSOURCINGImplications – FDI Inflow
Makati
Taguig City(Bonifacio Global City &
McKinley Hill)
Quezon City Eastwood City
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CBRE | Market View | Sept 2012
Forecasts
BPO – IT OUTSOURCINGImplications – Jobs Creation
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CBRE | Market View | Sept 2012
•Now moving to Vietnam to:- Gain from low cost labor supply- Gain from attractive offers from government
• (2009) India – 19,000 people as of June 2009
• (2011) Hochiminh – Phase 1: 150 staff, IT & BPO outsourcing
WHO / WHY / WHERECapgemini, from Europe to Vietnam
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CBRE | Market View | Sept 2012
•Now moving to Quang Trung Software City in Hochiminh City, Vietnam to- Gain from low cost labor supply- Gain from attractive offers from government
• Two R&D centers in China and India
• (2010) Hochiminh – investment cap: $US18 million, 1,000 people, testing & global services
WHO / WHY / WHEREHewlett Packard, from US to Vietnam
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CBRE | Market View | Sept 2012
•Now moving to Saigon Hi-Tech Park in Hochiminh City, Vietnam to
• - Capture opportunities for automation software- Gain from attractive offers from government
• 15 centers in Asia. Strong in China & Singapore
• (2012) Hochiminh – 50 people, software & global services
WHO / WHY / WHERERockwell Automation, from US to Vietnam
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CBRE | Market View | Sept 2012
•Now moving to Tan Thuan EPZ in HochiminhCity, Vietnam to- Tap on skilled labor with language competency - High growth on telecoms & network software
• 7 centers in Asia (India, China, Japan, Korea, Sing, Taiwan)
• (2011) Hochiminh – 300 people, software development
WHO / WHY / WHEREAricent, from US to Vietnam
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CBRE | Market View | Sept 2012
•Now moving to E-Town in Hochiminh City, Vietnam:
• - Synergy with manufacturing plant in Dong Naito service customers in Japan & Asia
• - Young labor force• - Attractive government incentives
• 4 R&D centers in Asia. India, China, Japan, Singapore
• (2011) Hochiminh – investment cap: $US4.5 million, 1,000 people, software & embedded system services
WHO / WHY / WHEREBosch, from Europe to Vietnam
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CBRE | Market View | Sept 2012
TRENDSHCMC still captures the lion share
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CBRE | Market View | Sept 2012
TRENDSBinh Duong & Dong Nai rises
Breathtaking and Stunning Façade
• Perfect Office Solution in Binh Duong• High specs• Competitive rental
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CBRE | Market View | Sept 2012
TRENDSDecentralized & business parks
MapletreeOffice Building
Sacom @ SHTP E‐town @ Tan Binh
TMA @ QTSC
Incubation @ TT EPZ
Centerpoint @ Phu Nhuan
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CBRE | Market View | Sept 2012
DRIVING FACTORSSpecs
39 x office units~ 190 to 250 sqm each
Column-Free Space~ 2,000 sqm per floor
Highly Efficient Layout
Tall Ceiling Height: 4.5m
Ample Natural Light
Floor Loading: 500kg
15.6 m
39 m
62.3 m
Well-Planned Building Design & Specifications
Mapletree Floor Layout Typical office floor Layout
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CBRE | Market View | Sept 2012
DRIVING FACTORSRents
• Possible short-term bottom in office rents
• Average business parks office rent below $20/m2/month.
• In par with office rent in HCMC’s peripheral area and Da Nang (~$12/m2/month)
• 60% saving on rental vs. downtown buildings
Business parks office rent
Source: CBRE Market View Q2/2012
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CBRE | Market View | Sept 2012
DRIVING FACTORSStrong supports / Fast track services
Lice
nse
s &
Perm
its
One Stop Service
Availability of tax incentives
Approval & issuance of investmentCertificates
HR support
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CBRE | Market View | Sept 2012
Steps in the right direction• Information technologies and telecom are consider the primary infrastructure to enable
Vietnam’s development. e.g. High Tech Law, Information Technologies Law.• PM Decision 50/2009/QD-TTg on 4/29/2009, "Regulation on Management &
Development Program of the software industry and the development program of the digital content industry in Vietnam" in order to remove obstacles and promote the implementation of development programs and software industry.
• IT-related industries are entitled to high tech incentives.• MOF Circular 96/2011 extending Tax Incentives for supporting industries in (1)
Electronics and (2) IT• Personal income tax reduction for IT workers is in serious consideration
DRIVING FACTORSStrong supports / One stop services
SOFTWARE UP 10% ($US1.17 bil.)
79,000 people
DIGITALCONTENT
UP 25% ($US1.16 bil.)
60,000 people
ELECTRIC & ELECTRONIC PRODUCTS
UP 101% ($US11.3 bil.)
167,000 people
Source: Vietnam ICT Outlook 2012
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CBRE | Market View | June 2012
187 U.S. and Canada Offices
14 Latin America Offices
109 Europe Offices
25 Middle East and Africa
Offices
55 Asia Offices
30 Australia & New Zealand Offices
Thank you for your attention.
www.cbrevietnam.com