HANOI. Economics Quick Stats. Hot Topics. Hanoi s GDP (%) Hanoi s CPI (%) HANOI

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1 CBRE VIETNAM HANOI January 2012 Economics Quick Stats Hot Topics Change from last VIETNAM 2011 Current Yr. Qtr. Real GDP Growth 5.89% Implemented FDI Exports Imports $11 bil $96.3 bil $105.8 bil CPI 18.58% Tourism (arrivals) 6 mil Base Rate 9% Exchange Rate (e-o-p) 20,828 *The arrows are trend indicators over the specified time period and do not represent a positive or negative value. ECONOMY: Curbing inflation and stabilizing macro-economy toward sustainable development remain key economic tasks in RESIDENTIAL: Buyers financing was much worsened towards the year end. SERVICED APARTMENTS: Stronger competition with buy-to-let apartments & new entrants will lead to another drop in occupancy among existing projects in the next quarter. OFFICE: The oversupply situation of the market will likely increase vacancy rate even further in the coming time. RETAIL: Hanoi has seen 109,500 sm (NLA) new shopping opportunities in non-cbd locations, as rents in the city centre continue to be firm. HOTEL: The year 2012 might be a challenging time for the hotel industry. VIETNAM GDP growth rate of 2011 was 5.89% y- o-y, a reasonable growth rate considering the world s current difficult economic condition and the government s focus on curbing inflation and stabilizing the economy. CPI of the whole year reached 18.58%. Curbing inflation and stabilizing macroeconomy toward sustainable development remain key economic tasks in Export turnover reached US$96.3 billion, increasing 33.3% y-o-y, while import turnover was US$105.8 billion. Trade deficit was at US$9.5 billion, equal to 9.9% of export turnover. FDI (including new registered capital and increased capital from existing projects) reached US$14.7 billion, equal to 74% of FDI in However, implemented FDI was at US$11 billion, the same level in The highlight of FDI in 2011 was the manufacturingconstruction sector which accounted for 76.4% (compared to 54.1% in 2010). Percentage of FDI in the real estate sector declined drastically, from 34.3% last year to 5.8% this year. Total number of international arrivals to Vietnam reached 6 million, increasing 19.1% compared to HANOI Hanoi s GDP (%) Hanoi s CPI (%) 12% 1 8% 6% 4% 2% Hanoi s GDP annual growth rate reached 10.1%. Manufacturing- Construction sector increased by 10.2%, service sector increased by 10.8% and Agro, Forestry, and Fishery sector increased by 4.4%. In 2011, export turnover reached US$10 trillion, increasing 27.1%; import turnover reached US$25 billion, increasing 16.6% y-o-y. CPI of Hanoi showed sign of slowdown in the last months of 2011, where CPI was 1.32%, 1.06%, 0.2%, 0.13%, 0.29%, and 0.61% for the months from July to December. CPI in December increased 17.07% y-o-y and CPI of the whole year reached 17.89%. Total registered FDI in 2011 reached US$1.5 billion. Capital for 283 new registered projects was US$957 million, which doubled 2010 s figure. The increased capital was US$543 million for 61 existing projects. Total number of international arrivals to Hanoi rose slightly by 2.6%, reaching 1.3 million in Hotel and travel revenue rose by 6.4% y-o-y. Total outstanding loan reached VND569.9 trillion in 2011, increasing 11.7% y-o-y. 4% 3% 2% 1% Source: Hanoi Statistics Office

2 RESIDENTIAL FOR SALE MARKET CONDOMINIUM LUXURY HIGH-END MID-END LOW-END TOTAL Total launch supply (units) 2,220 22,330 64,130 16, ,920 New launch (units) 0 1,990 1, ,260 Primary market - Average asking price (US$ psm) N/A $1,430 $1,120 $760 $1,103 Secondary market - Average asking price (US$ psm) $3,280 $1,860 $1,340 $980 $1,870 Q-o-q change (%) -1.8% -3.1% -3.6% -3.2% -2.9% Y-o-y change (%) -1.7% -3.8% -3.8% -2.4% -2.9% New Launch Supply (units) 25,000 20,000 15,000 10,000 5,000 0 Condominium Asking Price (US$ psm) - Secondary Market $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 Luxury High-end Mid-end Q1 Q2 Q3 Q4 Whole year Low-end 2008 Q4/2011 welcomed a new launch supply of 4,500 condominium units, out of the year s total new supply of 25,000 units. The fourth quarter typically accounts for the largest proportion of annual supply. In 2011, however, developers adjusted down launches towards the year end in response to the market slowdown. Secondary asking prices decreased in all market segments by up to 3.5% q-o-q. Completed units retained prices better than under construction units, with completed units recording a price adjustment of -1% y-o-y against -7% of under construction units. Buyers financing was worsened towards the year end. For instance, the ratio of overdue mortgages in a surveyed bank stood at 1 in Q4/2011, compared to 5% in Q1, against a benchmark safe ratio of 3%. The major source of mortgage payment is earnings from borrowers independent businesses rather than salary, which is highly volatile. The current economic downturn undoubtedly plays a part in the current financing crisis anticipates 22,000 condominium units from 60 projects. Without active trading by speculators, trading volume is expected to lower is forecast to be a challenging year for the economy, continuing its negative impacts on the condominium market. The landed house sector in Hanoi continued to experience a downward trend in secondary asking prices across all projects. 4 of land plots and house units in 14 districts saw lower secondary asking prices q-o-q, while the other 6 saw prices remain the same. The decrease ranged from a few to ten million VND per sm. Compared to early 2011, approximately 7 of the projects recorded lower secondary asking prices, with level of decreases popular in the range of 1-2. Construction progress was slow in many projects, with exceptions including Vincom Village and Hillstate (by Hyundai). Looking ahead, market activity will largely depend on the pick up of the economy. Projects dominated by speculators will be under pressure for further price correction. For other projects, more transactions are expected around March-April 2012 as prices level off, although 2012 will still be a difficult year in general for the residential sector.

3 OFFICE MARKET GRADE A GRADE B GRADE C TOTAL Number of buildings NLA (sm) 254, , , ,363 Vacancy rate (%) % - - Q-o-q change pp 5.85 pp - - Y-o-y change pp 9.40 pp - - Average asking rent (US$ psm per month) $36.37 $ Vacancy (%) Q-o-q change (%) % - - Y-o-y change (%) -8.84% -8.52% - - Asking Rents (US$ psm per month) $60 $50 $40 $30 $20 $ Four projects came on-line in the forth quarter of 2011, most notably is the Keangnam Landmark 72 (89,000 sm NLA). The other three grade B projects (VA, Detech and Mipec) brought on-line 143,000 sm, of which 8 came from the Western submarket. Although the positive net absorption reached nearly 25,000 sm, the massive new supply pushed the average marketwide vacancy to a record 28%. The vacancy of both and B offices were 34.5% and 24.4%, respectively. Average asking rent has no major changes thanks to good net absorption rate. A price reduction happened only in projects in the West market as landlords attempted to fill up large vacant space. Tenants are hesistant to have their offices relocated due to significant costs of equipment and fitting out, and change in working environment. To attract tenants, developers implemented various types of promotion, including free billboards displaying outside buildings, and extended free-rent period. Tenants can be offered 3-6 month free rent for projects in the CBD, and 8-12 month free rent for projects in the West market. It is clearly a rent reduction but headline rents are kept unchanged to maintain the buildings reputation. New projects will come online in Despite high interest rate, certain projects still have good construction progress. Projects in the West market keep attracting tenants having demand for large space. In the West, developers are ready to negotiate and support tenants to acquire large space with low price. Besides the short-term lease, in many projects being fitted out, developers offer long-term leasing with flexible terms to fill up vacant space. The oversupply situation of the market will likely increase vacancy further in the coming time.

4 RETAIL MARKET Total Supply (NLA sm) 2,000,000 1,500,000 1,000, ,000 Shopping Centre Department Store Retail Lobby 0 *Future Supply GFA sm Source: CBRE Vietnam f +2014f Existing Supply by District (NLA sm) Dong Da Hai Ba Trung Hoan Kiem Tu Liem Cau Giay Long Bien Others 32% 19% 4% 15% 13% 11% 6% DEPARTMENT STORE SHOPPING CENTRE RETAIL LOBBY TOTAL Total supply Q (NLA, sm) 46, ,981 10, ,291 New supply (NLA, sm) 30,000 79, ,500 Vacancy rate (%) % 5.8% 10.6% Average asking rents (US$ psm per month) $45.5 $34.3 $45.9 $37.1 CBD - $57.5 $77.2 $59.7 Q-o-q change (%) - 5.5% 17.6% 7.5% Y-o-y change (%) % 5.5% 0.3% Non-CBD $45.5 $27.9 $21.0 $32.2 Q-o-q change (%) -15.7% -18.2% 10.5% -12.2% Y-o-y change (%) -15.7% -26.1% % Hanoi has seen one of the biggest changes in retail in the fourth quarter of With the opening of Savico Mega Mall, Vincom Center Long Bien and Parkson Keangnam, an additional supply of 109,500 sm (NLA) has entered the market, out of which 30,000 sm account for the Department Store Parkson Keangnam. The opening of Savico Mega Mall has set a new mark in modern retailing, as this shopping centre is due to the number of anchor tenants (4), its location (suburban) alongside a major street (Nguyen Van Linh) and its retail size (43,500 sm NLA) Vietnams first regional shopping mall. Average asking rental rates in CBD area have remained high (US$59.7). Having had difficulties with vacancies, Hang Da is currently improving its occupancy rate. In general the current movements of tenants have been diversified, as e.g. Pico Mall has compensated some shop units with the opening of its food court. Furthermore the Garden Mall has improved its situation as attractive rental packages have lead brands such as Mango and Charles & Keith to fill up space. Rental rates in non-cbd locations have remained the same, respectively declined, as more space with a lower rental rate has entered the market. Having currently US$32.2 for average asking rents, it is likely that pressures will continue. In 2012 approximately 181,000 sm (GFA) new retail space will enter the market. Already existing challenges will rise further, as the number of tenants won t increase significantly. Furthermore tenants will rather concentrate on consolidation than expanding their business. In order to avoid centre failure, developers will have to focus more upon incentive packages and entertainment facilities, which increase the visitors duration to stay.

5 SERVICED APARTMENT MARKET INTERNATIONAL OPERATOR SELF- MANAGED TOTAL Total Supply (units) 886 1,481 2,367 New Supply (units) Vacancy Rate (%) market-wide 23.35% % Vacancy Rate (%) (excl. 4 recently completed projects) 13.55% 10.27% 11.42% Average asking rents (US$ psm per month) $39.57 $28.91 $32.45 Q-o-q change (%) 0.36% 1.61% 1.1 Y-o-y change (%) -4.26% 1.73% 4.29% *4 recently completed projects include Grand Plaza, Hoa Binh Green Apartments, Crowne Plaza and Me Linh Plaza Tower Total Supply (sm) 3,500 3,000 2,500 2,000 1,500 1, Asking Rents (US$ psm per month) $50 $40 $30 $20 $10 International operator Self-managed f 2013f International operator Self-managed There was no new supply in the last quarter of 2011 as Keangnam Landmark 72 delayed its original schedule to open in November. Average asking rents increased slightly by approximately 1% both on sm basis and on unit basis, compared to the third quarter of That said, landlords seemed to be more willing to compromise on actual rents, foreseeing challenges of the current and upcoming competition. Vacancy was at 11.42% in the fourth quarter, up from 8.32% in the previous quarter, not counting the four recent entrants of Grand Plaza, Hoa Binh Green Apartments, Crowne Plaza, and Melinh Plaza Tower. The increase in vacancy was mostly due to competition from buy-to-let projects and pre-leasing activity from the upcoming project of Keangnam Landmark 72. Inquiries dropped towards year end and the holiday season, with increasing demand from individuals with lower budget of less than US$2,000. Looking forward, Keangnam Landmark 72 serviced apartments opening in early 2012 will heavily target Korean clients. It is anticipated that they would utilize an aggressive pricing scheme in order to fill up its large stock, while directly competing with its buy-to-let units in the two residential towers. Stronger competition with buy-to-let apartments and new entrants will lead to another drop in occupancy among existing projects in the next quarter. Projects in the western area, especially by the Pham Hung corridor will attract customers based at industrial parks as the Ring Road 3 is completed.

6 HOTEL MARKET Average Daily Rates (US$ per room per night) Occupancy Rate (%) 5-STAR 4-STAR 3-STAR TOTAL Total supply Q (rooms) 3,780 1,750 1,915 7,445 New supply (rooms) Average Occupancy Rate (%) 59.38% 52.42% 60.96% 58.62% Average Room Rate (US$/night) $ $64.61 $37.58 $62.90 % change (y-o-y) 6.74% -2.81% 6.45% 6.75% % change (q-o-q) -9.44% -4.38% -6.58% -3.19% Revenue per Available Room (US$/night) $67.88 $33.87 $22.91 $36.88 $160 $140 $120 $100 $80 $60 $40 $ % change (y-o-y) % 11.16% 16.31% % change (q-o-q) % % % % 5-star 4-star 3-star 5-star 4-star 3-star Hanoi received 1.3 million international visitor arrivals in 2011, up 2.6% y-o-y. Domestic arrivals reached 7.4 million, down 2.3% y-o-y. Overall, arrivals to Hanoi in 2011 was decreasing, especially international arrivals for business purpose and domestic visitors. It could be resulted from the economic downturn both globally and domestically. As at Q4/2011, accumulated stock of the entire market is 7,445 rooms, representing a 12.5% increase y-o-y and 1% decrease q-o-q. Additional supply during the last quarter was from the last 37 rooms from the 5-star Hotel de l'opera Hanoi. The quarter also witnessed the temporary close for renovation of the 3-star Tay Ho hotel (120 rooms). Unlike the previous quarter, the high season has brought average occupancies in all segments up by 6-9 pp q-o-q but still lower by 3-12 pp y-o-y, most severely in the 4-star segment. In term of ADR, 5-star was the only segment enjoying 7% increase q-o-q while that in the 3- and 4-star segments went down slightly 1%-3%. On a y-o-y basis, ADR experienced a 4%-9% decrease market-wide. Regarding future supply, no new projects were announced during the quarter. Novotel Hanoi on the Park project was approved to be moved to Pham Hung. We expect to see roughly 1,000 5-star rooms to come onstream in However, some projects might defer their openings, depending on the market condition by that time. The year 2012 might be a challenging time for the hotel industry. We anticipate a slight increase of international visitor arrivals to Hanoi versus a small reduction in domestic arrivals. By grade, we expect that 3-star performance will likely be more stable than the 4- and 5-star ones.

7 MarketView HANOI For more information regarding this MarketView or to find out more about any aspect of our services, please contact: CBRE Vietnam Co., Ltd. RESEARCH & CONSULTING Marc Townsend, Managing Director m e. Ngoc Le, Publications Manager m e. Hanoi Nguyen Thanh Tuyen, Associate Director m e 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. Central Business District (CBD) The Central Business District in Hanoi is Hoan Kiem District and a portion of Hai Ba Trung District, the commercial and tourism centre. The developing business district in the West is located on the border of Cau Giay and Tu Liem Districts. Major developments are clustered along Pham Hung. Interest Rate The base rate set by the SBV is used as a reference by other banks and financial institutions. The discount rate is the interest rate which the SBV charges member banks for short-term loans via discounting commercial paper or other debt instruments. The refinancing rate is the interest rate that the SBV charges on loans to member banks. Net Lettable Area (NLA) Net Lettable Area of whole floors include toilets and lift lobbies, but exclude common areas such as lift shafts, stairs and plant rooms. Net Lettable Area for sub-divided units is the Saleable Area of that unit plus a proportionate share of the communal toilets, lift lobbies and passageways among subdivided units on that floor. Net Absorption Net Absorption figures represent the net increase in occupied floor space in the period. The figures are arrived at using the following method: Rent Net Absorption = new completions + vacancy figures at the beginning of period - demolition - vacancy figures at period-end Rent is quoted as the average asking rent, without accounting for any incentives. Rents are stated in US$ per square metre (psm) as well as in those terms gross or net, inclusive (including management fees and/or property taxes) or exclusive (excluding management fees and property taxes) that are customarily employed in the respective sector. Rents or average room rates are quoted on the following basis: Office: Asking rents, NLA, exclusive of VAT and inclusive of service charges Retail: Asking rents, NLA, exclusive of VAT and inclusive of service charges Serviced Apartments: Asking rents, NLA, inclusive of VAT and service charges Residential Supply Existing supply : is the total number of units that have been handed over for occupation. New completion : the total number of units that were handed over for occupation in the review quarter these are added to existing supply. New launch : the number of units that were released to the market by developers (official start of sales for a project) in the review quarter. All units in each development are included in the calculations, however, the developer may divide sales into numerous phases and thus not all units may come online at launch date.