Da Nang City MarketView

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1 Da Nang City MarketView Q2 213 CBRE Global Research and Consulting VN Q2 GDP 5.% HCMC Q2 GDP 8.1% DA NANG Q2 GDP 7.1% VNINDEX 24% LOCAL GOLD PRICE 19.4% TRADE BALANCE US$1.9 billion ECONOMY IS MOVING IN THE RIGHT DIRECTION 1 Quick stats VIETNAM Q2 213 Q-o-Q Y-o-Y Real GDP Growth 5.% Registered FDI $4.4 Bil Exports $32.4 Bil Imports $34.3 Bil CPI (e.o.p) 6.7% Tourism (arrivals) 1.7 Mil Base Rate 9% Exchange Rate (e-o-p) 21,36 HCMC Q2 213 Q-o-Q Y-o-Y Real GDP Growth 8.1% CPI (e.o.p) 2.8% Registered FDI $356 Mil Exports $16.1 Bil Imports $7.5 Bil Retails and Services Turnover (VND Tril) Tourism (arrivals).9 Mil Da Nang Q2 213 Q-o-Q Y-o-Y Real GDP Growth 7.1% CPI (e.o.p).12% Registered FDI $87.5Mil Exports $865Mil Imports $46.9Mil Retails and Services Turnover (VND Bil) Tourism (arrivals) 1.54Mil Chart 1: Gold price decreased Local gold sell price (VND million) VNIndex LOCAL GOLD Chart 2: VNIndex recovered Trading value VNIndex Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Background news for the economy Between the end of June and beginning of July a number of announcements were made on expansionary monetary and fiscal policy which will provide additional momentum to the economy. These include measures to lower the interest-rate ceiling, cut personal income tax and reduce the tax rate for social housing. These measures will increase disposable income for a wide range of the population and increase money supply to the market. Thanks to the new deposit rate, bank funding costs were reduced, which will lead to lower lending rates in coming months, thus, boosting domestic consumption and production. The Vietnam Asset Management Company (VAMC) will finally start operating from July 9. GLOBAL GOLD 9/11 3/12 9/12 3/13 4, 2, 2, 1,5 1, Global gold price (US$) Source: SJC, Gold.org Trading Value (Billions VND) Source: FPTS Benefits for the real estate sector In the first six months of 213, the global gold price decreased 24% while the local gold price trended down 19%. The stock market, VNIndex peaked at 528 points in June, then made a profittaking adjustment, which is currently up 15.8% YTD. For these reasons, residential real estate again becomes attractive to Vietnamese investors as other alternatives (gold and deposit accounts) offer limited returns. Resolution 2 is another push for the real estate market, which offers a VND3 trillion loan scheme to support social housing developments. This policy addresses demand issues directly by providing mortgages to homebuyers and encourages developers to focus on the mass market. 212, CBRE, Group Inc.

2 Q2 213 Da Nang City MarketView DA NANG OFFICE STABLE MARKET PERFORMANCE Chart 2: Office Average Asking Rent (US$/psm/month) $25 $2 $15 $1 $5 $ Grade A Grade B Grade C Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Average asking rents showed stable status in this quarter Compared to the first quarter of 213, Grade A office asking rents were flat in the second quarter while asking rents for Grade B and Grade C showed very modest changes. Grade B market-wide rents showed a minor change of.7% q-o-q decrease and the average rents of Grade C increased.6% q-o-q. Rents in the third quarter are expected to be flat as landlords try to capitalize on the declining vacancy rates to continue to fill their spaces Chart 3: Office Average Vacancy (%) Grade A Grade B Grade C 6% 4% LIMITED OFFICE BUILDING DEMAND FOR LARGE SPACES FROM 3 SQM TO 5 SQM Little change recorded in the average vacancy as the main demand ranged from 1 sm to 2 sm from existing companies who want to relocate. The average vacancy rate decreased slightly by.8% q-o-q and 2.2% y-o-y. This quarter, Grade A average vacancy decreased by 2.3 percentage points q-o-q while the average vacancy in Grade B increase 2.5 percentage points on a q-o-q basis. Grade C vacancy decreased 3.5 percentage points q-o-q. 2% % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Market still saw major demand from IT & software industry. Total occupied area was 61,334 sm, representing a 1.1 percentage point q-o-q increase. Although the market is still affected by economic downturn, both locally and globally, some companies shrink their office spaces and in return we see new companies entering or relocating their office base, accounting for a small increase in net absorption, presenting a 3.4% y-o-y increase this quarter. Chart 4: Office Net Absorption (sqm) The market continued to see the majority of demand derived from international enterprises operating in IT & software and insurance industry. 8, 6, 4, 2, Grade A Grade B Greade C In spite of the complete infrastructure and low prices compared to other cities, many companies hold their plan to open brand office in Da Nang after inspection. It is because the market is quiet and it is not easy to gain profit in this economic status. There is a trend that tenants will consider not only other cities in Vietnam, but other places in region like Philippines and Malaysia as alternatives to open business because costs are similar Q1/213 Q2/ , CBRE, Group Inc.

3 Q2 213 Da Nang City MarketView DA NANG RETAIL FUTURE PROJECTS ARE STILL ON HOLD No new supply, future projects are on hold There was no new supply in the second quarter of 213. Currently, there are four developments under construction and five developments under planning status. From 211 to 213, 128,155 sm GFA from seven projects is expected to complete but all are under planning status or have put construction on hold so the completion date and future supply area will need to be monitored. TENANTS MOVE OUT TO SHOPHOUSES DUE TO LIMITED FOOT TRAFFIC IN SOME SHOPPING CENTRES The second quarter of 213 recorded an increase in average vacancy rate by 11.5 pps q-o-q and 6. pps y-oy, to a rate of vacancy at 22.1%. This increase was mainly attributed to more empty spaces recorded at Dragon Vinh Trung and Riverside Tower Commercial Center. While Dragon Vinh Trung failed to retain tenants as empty spaces kept increasing, RTCC tried to survive by converting the first floor to the proposed department store to open next quarter after relocating all tenants at the first floor to ground floor. While vacancy recorded at shopping centres increased this quarter, many shophouses were leased out, that accounted for the stable demand for shophouse. The market average asking rent saw no change Rents are tracked for two main retail formats: retail arcade/podium and shopping centres. During the second quarter the average asking rent for both shopping centres and retail arcade/podium remained unchanged at US$24.18, an 8.3% y-o-y decrease and at US$15.5 psm respectively. Although keeping their asking rents firm, some landlords offered attracted promotion such as discount and more free fitting out time. Chart 5: Retail Average Asking Rents (US$/sm) Chart 6: Retail Vacancy (%) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Demand While shopping centres continued to see an increase in the vacancy rate, retailers are generally observed to have moved out or expanded business within shophouses. Demand for retail in Da Nang is expected to remain stable in 213. The market is still not ready to welcome new wellknown foreign brands because of the old-style mind-sets for traditional markets and shophouses. Within the various retail categories, electronics space remained stable, textiles and F&B continued to expand. 212, CBRE, Group Inc.

4 Q2 213 Da Nang City MarketView 4 DA NANG RESIDENTIAL MARKET COMPLETED PROJECTS CONTINUED SHOWING GOOD SALES PROGRESS Chart 7: Condominium, New Launch in Quarter Number of units Chart 8: Condominium, Average Price Change (%, q-o-q) Chart 9: Second Home Villas, Sales Volume Change by Quarter Sale Volume (units) 6% 3% 1,2 1, % -3% -6% whole year Q4 Q3 Q2 Q YTD Luxury High_end Mid-end Affordable Q2/9 Q2/1 Q2/11 Q2/12 Q2/13 Sales volume of Q Q2/213 welcomed the launch of Fusion Suites which is the third condo-tel project in Da Nang, providing a total of 124 high-end hotel apartments. After four consecutive quarters without new launch, the coming of Fusion Suites slightly reactive the condominium market. Compared to previous quarter, the Da Nang condominium market has witnessed more sale activities such as new sales campaigns offering special promotion packages; new launches, re-launches and breaking ground events. Apart from taking advantage of the beginning of the peak season, these positive movements show that developers have slowly regained confidence. As of Q2/213, the unsold stock of Da Nang condominium market accumulated to 1,561 units, an increase of 1.5% q- o-q and a decline of 1.4% y-o-y. Sales volumes during Q2/213 were approximately 78 units across all sectors, in which the mid-end segment witnessed the highest rates of sale with 39 transactions. It was followed by the high-end segment with 2 sales and the remaining transactions were balanced by the affordable and luxury developments. In the review quarter, there was no change in the average asking price of the luxury segment whereas the average asking price for mid-end and affordable segment decreased by 1.4% q-o-q and.2% q-o-q respectively. The new launch in Q2 caused the increase of.4% q-o-q in the average asking price of high-end properties. Price reduction appeared in few projects whereas pricing promotion continued to be used as the main sales strategy Second home market was stagnant during Q2/213 in terms of the new supply and sales activities. There was no launch since the last quarter of 212. As of Q2/213, unsold stock accumulated to 375 units, recording a decline of 5.9% q-o-q and 13.3% y-oy, respectively. Sales volumes during the second quarter were 4 units at Hyatt Regency, the Dune and Vinpearl Luxury Da Nang. The sales rate of projects continued to experience a downward trend as the sales volume declined to 35 units in 212 and 7 units in 1H 213. Generally, the sales rate peaks in Q2 and Q3 of the year due to the high season of Da Nang tourism market which attracts a big number of visitors. In Q2/213, the average sales rate achieved 47.3% which was a modest increase of.5% q-o-q. In contrast, on a y-o-y basis, it witnessed a sharp decline of 8.2%. Residential Market Outlook The newly-launched VND3-trillion credit package is expected to boost the property market, however, so far Da Nang residential market has not seen the effectiveness as there is only one housing project meeting the requirements. There are several factors that may motivate buyers during current market conditions such as the cut in deposit interest rate cap to 7%, down from 7.5% previously; falling gold prices and stabilizing exchange rate and a greater bargaining power of buyers. 212, CBRE, Group Inc.

5 Q2 213 Da Nang City MarketView DA NANG 3-5 STAR HOTEL MARKET OCCUPANCY RATES CONTINUED TO IMPROVE Chart 13: Hotel, Historical Supply and Forecast 1, 7,5 5, 2,5 5 star 4 star 3 star F 215F 216F Chart 14: Hotel, Supply by Location Q2/213 Highlights The quarter saw the opening of the four-star Novotel Premier Han River (323 keys) and three-star Eden Da Nang Plaza (11 keys). As of Q2/213, accumulated stock is 5,56 keys, mostly located in the CBD and on the seaside. Da Nang tourism market improved in Q2/213 due to the annual start to the peak period and International Fireworks Competition which is one of the biggest events in Da Nang held at the end of April, welcoming approximately 395, tourist arrivals. As a result, the number of arrivals in Q2/213 went up to 951,8 visitors, representing an increase of 29% compared to the same period last year. In 1H213, there was an addition of seven international airlines to Da Nang International Airport, increasing the total number of international airlines to 18. The number of foreign tourist went up notably by 1.8% compared to those of 1H212. Accor Hospitality continues to strengthen their presence in Da Nang with the operation of three hotels, Grand Mercure Da Nang, Novotel Premier Han River and Pullman Da Nang Beach Resort. 21.7% 39.1% 39.1% Seaside CBD CBD fringe The new launches attributed to the upward trend of the ADRs and the downward trend of the average occupancy rate of four-star hotels In Q2/213, on a y-o-y comparison, six out of ten hotels witnessed a decline in room rates ranging from US$2.85 to US$ However, the improvement of Crown Plaza and Vinpearl Luxury s ADR and high room rates of the new openings brought about a sharp increase in ADR across the four and five-star segment. As a result, the ADR went up by 37.1% y-o-y for five-star hotels and 5.6% y-o-y for four-star hotels. In contrast, the average occupancy rate for four-star segment saw a decrease of 4.1 pps y-o-y due to low occupancy rates in newly-opened hotels, while the five-star sector experienced an increase of 9. pps y-o-y in the average occupancy rate. 5 Chart 15: Hotel, Change by Year ADR OCC RevPar 6.% 35.% 1.% -15.% 5-star 4-star -4.% More challenges are expected for the hotel market due to increasing supply and the presence of international hotel operators. Hospitality market becomes more challenging as there will be approximately 2,36 additional three- to five-star hotel rooms in 214. In the near future, the entrance of international brands such as Melia, Le Meridien, Hilton, Marriot will improve the service quality levels and promote Da Nang hospitality beyond the local market and also increase the competition among existing developments. Therefore, it is expected that room rates of existing developments would be stable or continue to decline over the next quarters. Until 1H214, the hospitality market is expected to welcome more three-star hotels due to their good construction progress while a majority of five- and four-star hotels have been delayed. 212, CBRE, Group Inc.

6 Q2 213 Da Nang City MarketView Figure 1: Master Plan of Da Nang City Toward 22 CONTACTS For more information about this Da Nang MarketView, please contact: Marc Townsend Managing Director CBRE Vietnam Unit 121, Melinh Point Tower, 2 Ngo Duc Ke Street, District 1 t: e: marc.townsend@cbre.com Dung Duong Associate Director HCMC Research CBRE Vietnam Unit 121, Melinh Point Tower, 2 Ngo Duc Ke Street, District 1 t: e: dung.duong@cbre.com Thao Le Consultant Da Nang Research CBRE Vietnam 3 rd floor, Indochina Riverside Tower, 74 Bach Dang, Hai Chau District t: e: thao.p.le@cbrevietnam.com + FOLLOW US GOOGLE # /posts FACEBOOK es/cbre/ TWITTER Marc Global Research and Consulting This report was prepared by the CBRE APAC Research Team which forms part of CBRE Global Research and Consulting a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. 6 Disclaimer 212, CBRE, Group Inc. CBRE Limited confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. 212, CBRE, Group Inc.