CBRE HCMC Office Services 2010 Tenants Evening Part I: 2010 Are we in for a happy ending? Tuesday 26th January 2010 Presented by: Mr. Chris Currie Associate Director Office Services
Market Overview Q1 2010 2009 supply has filled up quicker than previously thought Signs of companies revising 2010 headcounts upwards Vietnamese tenants financially strong and less risk averse CBRE Monthly enquiries are increasing Rents appear to be bottoming out after 2009 falls Pushback from some Landlords Sense of realism - Asking vs. Achievable now around 10% CBRE Absorption level of 154,000sm in 2009 Cluster of deals being done ~ US$30++ sm/month CB Richard Ellis Page 2
CB Richard Ellis Page 3 Recent headlines Asia strong
Indices 12 months VN Index 497.90 26 January 2010 58% Source: HSC Securities S&P 32% Source: FT.com CB Richard Ellis Page 4
Commodities YTD Vietnam Gold 40% Source: SJC NYMEX Crude 28% Source: FT.com CB Richard Ellis Page 5
The devaluing dong The hidden cost Vietnam Will Probably Devalue Dong 4% by Year-end Tamara Henderson, Australia & New Zealand Banking Group Ltd September, 2009 Currency Caps between 10 15% Advance Rent Payments at fixed exchange rates VND denominated lease agreements Date Exchange USD Effective VND % increase June 1 2009 VND 17,785.00 $25.00 $25.00 VND 444,625.00 January 26 2010 VND 18,469.00 $25.00 $25.96 VND 461,725.00 3.84% December 1 2010 VND 20,000.00 $25.00 $28.11 VND 500,000.00 12.45% For indicative purposes only forecast for 2009 and 2010 CB Richard Ellis Page 6
Asian Office Market Rent Cycle, Q4 2009 As of Q4 2009 Rental Growth Accelerating Rental Growth Slowing Jakarta Taipei Seoul J T S B Rents Falling Bangkok Rents Bottoming Out Kuala Lumpur K M Manila G Guangzhou S Singapore H Hanoi Tokyo T Bangalore HCM City Beijing B B Shang Mumbai hai S H M H Hong Kong New Delhi N NB. Markets do not necessarily move along the curve in the same direction or at the same speed. The rental cycle is intended to display the trend in net effective rents CB Richard Ellis Page 7
Major Buildings HTMC 2H 2011 Saigon Trade Center Centec Saigon Tower Kumho Asiana Plaza CT Group Building 1H 2011 Diamond Plaza Le Meridian 1H 2011 Metropolitan Vincom Tower 2H 2010 Existing Future SJC Tower - 2012 Me Linh Point Saigon Centre Sun Wah Times Square 2H 2011 Bitexco Financial Tower 2H 2010 CB Richard Ellis Page 8 A&B Tower M&C Tower 2H 2011
Vincom Center Office Tower Fitting Out Q1 2010 Commitment 20% Curtain Wall going up CB Richard Ellis Page 9
Bao Viet Fitting Out Q1 2010 Commitment - 40% (Landlord Occupies) Finalizing exterior façade, windows going-in CB Richard Ellis Page 10
Bitexco Financial Tower Fitting Out April 2010 Commitment - 18% Curtain wall in-line with construction, up to the 45 th level (out of 68 Level) CB Richard Ellis Page 11
A&B Tower Fitting Out Q2 2010 Commitment 47% Curtain Wall nearly completed CB Richard Ellis Page 12
HCMC Power Company Fitting Out Q2 2010 Commitment - 30% (Landlord Occupies) Curtain Wall going up CB Richard Ellis Page 13
Occupancy Rates & Vacant Space in Major Buildings Occupancy Kumho 65% Metropolitan 98% Sun Wah Tower 98% Saigon Tower 89% Diamond Plaza 100% Saigon Centre 95% CENTEC 85% Me Linh Point Tower 98% Saigon Trade Center 85% Sailing Tower 100% Royal Centre 80% CentrePoint 60% Approximate TOTAL Available Net Vacant Space* 9,000 1,000 - GFA 1,000 - GFA 1,700 - GFA 0 500 - SGFA 4,100 400 5,600 0 2,300 11,500 37,100sm Estimate only according to information obtained from landlords and agents CB Richard Ellis Page 14 * Unless otherwise stated
2010 Major New Supply Commitment Vincom Center 20% A&B Tower 47% HCMC Power Company 30%(LL Occupies) Bao Viet Building 40%(LL Occupies) The Flemington D11 0% Bitexco Financial Tower 18% Approximate new space Plus current vacant space Approximate TOTAL space available end 2010 Available Net Vacant Space* 51,600 9,000 13,700 7,000 21,806 30,922 134,028sm 37,100sm 170,000sm** Estimate only according to information obtained from landlords and agents Unless otherwise stated **Approx NET square metres CB Richard Ellis Page 15
Demand Which areas of the market Financials (Banks) / Insurance / Securities / Education / Oil & Gas / Software / Call Centre's CB Richard Ellis Page 16
HCMC Net Absorption of Office Space Net Take Up of Office Space (all grades) HCMC Net Absorption 156,000 154,000 GFA (sqm) 152,000 150,000 148,000 146,000 144,000 2007 2008 2009 Source: CBRE (Vietnam) CB Richard Ellis Page 17
CB Richard Ellis Page 18 Regional Net Absorption
Current Asking Rents Current Asking Rents (excl. Service Charge and VAT) $75 $70 $65 $60 $55 $50 $45 $40 $35 $30 $25 $20 $15 CB Richard Ellis Page 19 Kumho Metropolitan Sun Wah Saigon Centre Saigon Tower Diamond Plaza Me Linh Point CENTEC Saigon Trade Center Sailing Tower Kumho Metropolitan Sun Wah Tower Saigon Centre Saigon Tower Diamond Plaza Me Linh Point CENTEC Saigon Trade Center Sailing Tower Kumho Metropolitan Sun Wah Tower Saigon Centre Saigon Tower Diamond Plaza Me Linh Point CENTEC Saigon Trade Center Sailing Tower Q1 2009 Apr-09 Jun-09 Jan-10 Source: CBRE (Vietnam) *Buildings are not listed in any particular order within rental ranges. Kumho Metropolitan Vincom Center Sun Wah Tower Saigon Centre Saigon Tower Diamond Plaza Me Linh Point Bao Viet CENTEC A&B Tower Saigon Trade Center CentrePoint
GRADE B BUILDING CLOSING RENTS (NET AREA) Jun 2002 Apr 2005 Jul 2005 Dec 2006 Dec 2007 May 2008 Jan 2009 Jan 2010 Doubled and halved Low Zone 14 16 18 22 48 50 42 27 Mid zone 17 20 23 26 49 52 44 31 High Zone 20.5 24 28 28 50 54 46 32 Notes: Rents excl SC & VAT CB Richard Ellis Page 20
Tenants View of the Office Market Strengths Increased Supply = Increased Options Better Quality Rents are down Flexibility Landlords Landlords are moving quickly Opportunities Consolidation Longer term leases / strata title Upgrade in quality / grade Newer, more efficient space Weaknesses Parking Quality of Amenities Infrastructure Access Efficiencies Threats Decreased Landlord leverage Rents increasing Demand outstripping supply Delays in completion CB Richard Ellis Page 21
Summary If demand exceeds 2009 levels, rents may pick up in 2011 Vietnamese tenants will continue to dominate the market More long term leases / strata titled office space Occupancy levels critical to leverage Realism takes hold Happy Ending you may not get it your own way! CB Richard Ellis Page 22
Quarterly Reports for Ho Chi Minh City and Hanoi Quarterlyreports@cbrevietnam.com Available for each city, in English or Vietnamese Covers: National and City Economic Overview Office Retail Hotel Residential for Sale Investment Serviced Apartments Construction Costs CB Richard Ellis Page 23
www.cbrevietnam.com Over 300 markets in more than 50 countries 49 Thank You 33 We obtained the information above from sources we believe to be reliable. However, we have not verified its accuracy and make no guarantee, warranty or representation about it. It is submitted subject to the possibility of errors, omissions, change of price, rental or other conditions, prior sale, lease or financing or withdrawal without notice. We include projections, opinions, assumptions or estimates for example only, and they may not represent current or future performance of the property. You and your tax and legal advisors should conduct your own investigation of the property and transaction. CB Richard Ellis Page 24