CB RICHARD ELLIS VIETNAM HANOI www.cbrevietnam.com April 211 Economics Quick Stats Change from last VIETNAM Current Yr. Qtr. Real GDP Growth 5.4% FDI Exports Imports Hot Topics $2.37 bil $19.25 bil $22.27 bil CPI (average) 12.8% Tourism (arrivals) Base rate 9% 1.51 mil Exchange rate (e-o-p) 2,73 *The arrows are trend indicators over the specified time period and do not represent a positive or negative value. ECONOMY: The Government tightens monetary policy in an effort to control rising inflation; OFFICE: Average asking rents softened but quarterly net absorption was highest to date; RESIDENTIAL: Large new supply came online; secondary asking prices remained stable overall except for good price growth in the mid-end segment; RETAIL: Rtailers continue to expand market presence; CBD rents grow while non-cbd rents soften; SERVICED APARTMENTS: Internationally managed projects improve rents and international operators expand activities in the market; VIETNAM Q1/211 saw the Vietnamese Government shift focus from a growth centred policy to an inflationary control policy. Inflation in Q1/211 stood at 12.8% y-o-y, or 2.2% m-o-m in March, reflecting the highest levels seen since Q1/29. The Government tightened monetary policy during the quarter, with the State Bank raising both its discount and refinancing rate. The refinancing rate rose from 9% to 11% in February and then to 12% in March, making it increasing difficult for commercial banks to borrow from the State Bank and thus limiting lending into the economy. In a bid to improve the national trade deficit and counter a US Dollar shortage, the Vietnamese Dong was devalued for a fourth time since November 29. The Dong was devalued by 9.3% against the US Dollar and the daily trading band was decreased from +/-3% to +/-1%. Reflecting the tougher economic conditions that have been seen during Q1/211, GDP growth slowed to 5.4% y-o-y, in comparison with 5.8% in the same period last year. Despite these negatives it must be noted that industrial production continued to increase with Q1/211 seeing a 14.1% y-o-y increase. HANOI Real GDP Growth Rate & GDP per Capita in Vietnam & Hanoi 3,5 3, 2,5 2, 1,5 1, 5 27 28 29 21p Hanoi still witnessed strong GDP y-o-y growth in Q1/211 of 9.2% growth which superseded the 8.7% growth seen in Q1/21. It should be noted that the high GDP growth is impressive, taking into account the pressure of the rising CPI recorded in the first three months of the year. Hanoi s CPI hit 6.7% at the end of the first three months of 211. In March, the Hanoi CPI rose 2.41% m- o-m, the most significant monthly increase since the 2.61% m-o-m jump in CPI in February 21. The March spike in CPI was driven by steep price increases in the transportation sector of 7.41%, followed by a 3.19% increase in the housing, electricity, water, fuel and building materials sector. The CPI in the first quarter accelerated 13.56% y-o-y. Despite macroeconomic uncertainty, tourism and retail sales were bright spots for Hanoi s economy in Q1/211. Hanoi recorded 319, international arrivals in the first three months, a 12% increase over this period in 21. Retail sales were also strong, posting y-o-y growth of 22.7% over the first quarter. Real GDP growth, Vietnam (%) GDP per capita, Vietnam (US$) Real GDP growth, Hanoi (%) GDP per capita, Hanoi (US$) 25. 2. 15. 1. 5.. 211, CB Richard Ellis, (Vietnam) Co., Ltd.
OFFICE MARKET GRADE A GRADE B GRADE C TOTAL Number of buildings 14 39 52 15 NLA (sm) 165,332 392,749 25,267 763,348 Vacancy rate (%) 9.6% 18.7% - - Q-o-q change (pts) -7.79 pts 3.66 pts - - Y-o-y change (pts) -.32 pts -2.56 pts - - Average asking rent (US$ psm per month) $39.2 $26.9 - - Q-o-q change (%) -1.7% -3.2% - - Y-o-y change (%) -7.% -2.% - - Vacancy (%) 3% 2% 1% % Asking Rents (US$ psm per month) 8 7 6 5 4 3 2 1 Grade A Grade B 27 28 29 21 Q1/211 Grade A Grade B 27 28 29 21 Q1/211 Three new Grade B office projects, Hoang Cau Geleximco, Dong Da, (Midtown), Crown Complex, Tu Liem (West), and TTC Tower, Cau Giay (West) launched in Q1/ 211. These three projects brought nearly 47, sm NLA of new supply to the market. Average asking rents softened across all grades this quarter. Grade A asking rents were at approximately US$39-US$4 psm per month and Grade B at US$26-US$27 psm per month. Vacancy dropped in Grade A buildings to 9.6%, and rose slightly in Grade B buildings to 18.7%. Demand was strong in Q1/211. Total net absorption was 37,8 sm NLA, the highest level of quarterly absorption to date. Approximately 25,25 sm was taken up in Grade B buildings. 12,55 sm was absorbed in Grade A projects, mainly in the Western submarket. In 211, over 383, sm GFA of new supply will enter the market. Approximately two-thirds of new supply will be in the West. The launch of Keangnam Hanoi Landmark Tower will be the bright spot this year, as it is the only Grade A building to come to the market in 211. With a significant supply added to existing stock, 211 will be a good year for tenants that are presented with more options in high quality premises. In 211, tenants that signed leases in 28 when many new buildings launched now face a range of options this year. Tenants must decide if they should renew current leases coming to expiry and remain in existing premises or to relocate into more modern space in Midtown and the West. High demand from local and foreign banks, manufacturers, electronics and telecommunication companies with plans for expansion over the next two to three years comprise a majority of demand. 211, CB Richard Ellis, (Vietnam) Co., Ltd. MarketView HANOI April 211
18, 15, 12, 9, 6, 3, 4, 3, 2, 1, RESIDENTIAL FOR SALE MARKET LUXURY HIGH-END MID-END LOW-END TOTAL Total supply (units) 2,186 17,821 54,952 13,525 88,484 New launch (units) N/A 2,862 4,94 432 8,198 Primary market - Average asking price (US$ psm) - $1,665 $1,14 $894 $1,233 Secondary market - Average asking price (US$ psm) $3,174 $2,15 $1,574 $1,67 $1,958 Q-o-q change (%) -1.9% 2.8% 8.5% -2.1% 1.2% Y-o-y change (%) 5.8% 7.1% 21.3% 2.1% 1.8% Condominium Supply (Units) Secondary Asking Price (US$ psm) Launched 24 25 26 27 28 29 21 YTD 211 Luxury Hi-End Mid-End Low-End 24 25 26 27 28 29 21 YTD 211 The first quarter of 211 welcomed a significant new supply of 8,2 condominium units, equivalent to more than half of total new supply in 21. Vincom s projects, Royal City and Times City, accounted for more than 5% of new supply this quarter. The sales rate of the high-end segment has improved considerably relative to 21. Newly launched high-end projects attained good sales rates. Sales rates of earlier launched projects also picked up this quarter, but at a lower rate relative to their recent competitors. Notably, while in 21, projects sold above US$1,5 psm generally had slow sales, no such clear-cut price point exists in the first quarter of 211. Buyers are being increasingly selective and aggressively comparing prices against other factors such as location, developer s reputation, design, quality and facilities, before arriving at the final purchasing decisions. Asking prices in the secondary market remained stable overall, with the exception of the mid-end segment, which experienced good price appreciation of 8.5% q-o-q. This stable price trend is expected to continue in the second quarter of 211, given the continuing large expected supply of 4, units and subdued demand. 211, CB Richard Ellis, (Vietnam) Co., Ltd. MarketView HANOI April 211
RETAIL MARKET DEPARTMENT STORE SHOPPING CENTRES RETAIL LOBBIES TOTAL Total supply (NLA, sm) 11, 83,171 1,31 14,481 New supply (NLA, sm) Vacancy rate (%).% 14.9% 5.8% 12.5% CBD average asking rents (US$ psm per month) - $56.6 $65.6 $57.7 Q-o-q change (%) - 3.8%.% 3.9% Y-o-y change (%) - 3.8%.% 3.9% Non-CBD average asking rents (US$ psm per month) $54. $31.2 $19. $34.5 Q-o-q change (%).% -8.4%.% -5.9% Y-o-y change (%).% 5.% 5.6% -1.9% Total Supply (sm) 1,6, 1,4, 1,2, 1,, 8, 6, 4, 2, 27 28 29 21 211f 212f 213f 214f Asking rents (US$ psm per month) 6 5 4 3 2 1 Shopping centre Department store Retail lobby Shopping centre Department store Retail lobby 27 28 29 21 Q1/211 Total stock of modern retail spaces in Hanoi decreased by 11.8% in the first quarter of 211 compared to the previous quarter, to 14,481 sm as Trang Tien Plaza temporarily closed for renovation. Renovation and restructuring should allow it to achieve the premier status in the city. More new high-end and luxury tenants are anticipated to enter the market. The retail market was busy with a number of projects launching and beginning leasing activities this quarter. Savico MegaMall (Long Bien) and Mo Market (Hai Ba Trung) both held tenant launches in March 211. Melinh Plaza announced its plan to locate in Ha Dong. Vincom also revealed their aggressive plan to introduce ten shopping centres nationwide with total GFA of more than one million sm in the next five years under two brands: Vincom Center and Vincom Mega Mall. In the CBD, Trang Tien Plaza s temporary closure put the pressure on rental rates, resulting in a 3.9% increase in this submarket. Outside of the CBD, rental rates continued the downward trend from last quarter, which can be explained by rent discount policies offered by Grand Plaza and The Garden. In the next few years, retailers will have more choices as the market is expected to welcome large new supply from major regional projects. Vincom Mega Malls will locate in Times City with 23, sm and Royal City with 2, sm GFA. Ciputra Mall will add 2, sm GFA to future supply. 211, CB Richard Ellis, (Vietnam) Co., Ltd. MarketView HANOI April 211
SERVICED APARTMENT MARKET 5 4 3 2 1 INTERNATIONAL OPERATOR SELF-MANAGED TOTAL Total Supply (units) 751 1,436 2,187 New Supply (units) 66 66 Vacancy Rate (%) (excl. Hoa Binh Green & Grand Plaza) 3.85% 6.69% 5.67% Q-o-q change (pts) -2.43 pts -4.94 pts -1.54 pts Y-o-y change (pts) 2.85 pts -1.41 pts -.1 pts Average asking rents (US$ psm per month) $39.7 $28.7 $31.62 Q-o-q change (%) -3.99%.86% 1.64% Y-o-y change (%) -3.66% 8.88% 5.26% Total Supply (sm) 4, 3, 2, 1, International operator Self-managed 27 28 29 21 211f 212f 213f Asking Rents (US$ psm per month) International operator Self-managed 27 28 29 21 Q1/211 As expected, the supply of serviced apartments in Hanoi continued to increase in the first quarter of 211. Hoa Binh Green Serviced Apartments, located in Ba Dinh District, came into operation, adding 5 units to the market. This is the fourth asset in Hanoi managed by The Ascott, a Singapore-based serviced residence operator. Asking rents increased in several projects, driving average market rents up about 2% psm and 8% per unit basis. The occupancy rate improved overall compared to the previous quarter and compared to the same period of 21. Excluding the two recently launched projects of Grand Plaza and Hoa Binh Green, average vacancy rate across the projects was 5.7% in the first quarter of 211, down from 7.2% in the fourth quarter of 21. Such a strong performance was driven by a high level of enquiries received during the quarter with increased budgets, both of which were higher than those of the fourth quarter of 21. Looking forward, the serviced apartment market will continue to welcome new supply in the coming quarters. New enquiries from corporations entering or re-entering Vietnam will enable absorbing new supply. However, serviced apartments will continue to face competition from the buy-to-let apartments segment. 211, CB Richard Ellis, (Vietnam) Co., Ltd. MarketView HANOI April 211
HOTEL MARKET Total Supply (Rooms) 12, 1, 8, 6, 4, 2, Average Daily Rates (US$ per room per night) 16 14 12 1 8 6 4 2 5-star 4-star 3-star 27 28 29 21 211f 212f 213f 28 29 21 Q1/211 5-STAR 4-STAR 3-STAR TOTAL Total stock at the end of Q1 211 (rooms) 3,523 1,59 1,978 7,91 New supply (rooms) 393 8 473 Average Room Rate (US$/night) $11.9 $71.7 $36.9 $73.2 % change (y-o-y) -6.3% 12.1% -4.8% -.7% % change (q-o-q) -12.1% 6.2% -4.3% -5.5% Average Occupancy Rate (%) 58.4% 52.3% 52.8% 54.5% % change (y-o-y) -3.9% 3.% -6.2% -2.3% % change (q-o-q) -9.8% -12.3% -11.% -11.% Revenue per Available Room (US$/night) $65.8 $38.2 $19. $41. % change (y-o-y) -1.2% 17.5% -16.9% -4.4% % change (q-o-q) -23.% -11.4% -22.5% -19.7% 5-star 4-star 3-star Hanoi received 32, international visitor arrivals in the first three months of the year, a 12.2% y-o-y improvement. Domestic arrivals numbered 2.11 million in this period, a 8.4% growth y-o-y. The city s stock of three-to-five-star hotel rooms rose to 7,91 rooms this quarter, posting increases of 15.9% y-o-y and 7.1% q-o-q. Notable additions to stock included Crowne Plaza West Hanoi (393 rooms, 5-star, Tu Liem), and Prestige Hotel (8 rooms, 4-star, Hai Ba Trung). Compared to the same period last year, 4-star hotels continued to have the strongest performance. Average occupancy rates, average room rates and RevPAR of 4-star hotels recorded growths while 5- star and 3-star hotels experienced fair to significant reductions. As the hotel market in Hanoi develops, Grand Plaza Hanoi and Crowne Plaza West Hanoi are the first two test cases for the many high-end hotels planned around the Pham Hung corridor in the West. By year end, the market is expected to welcome the 5- star hotel in Keangnam Hanoi Landmark Tower and probably the full operation of Grand Plaza Hanoi. The success of those 5-star hotels will depend on their ability to attract MICE & business travelers with conference facilities, corporate rates, and access to businesses. 211, CB Richard Ellis, (Vietnam) Co., Ltd. MarketView HANOI April 211
LEGAL UPDATES THIS SECTION IS CONTRIBUTED BY BAKER & McKENZIE (VIETNAM) LIMITED DISCLAIMER: This Legal Update is intended to provide our readers with information on recent legal developments and issues of significant interest. It should not be regarded as legal advice or the opinion of Baker & McKenzie (Vietnam) Limited and no decisions regarding the subject matters discussed should be taken without consulting qualified advisors. HO CHI MINH CITY TO PILOT REITs Recently, several regulatory updates have indicated that legal framework for Real Estate Investment Trusts ( REITs ) in Vietnam is most likely to be implemented in the near future, and that Ho Chi Minh City has been chosen by the Government to implement a pilot program for building the REIT regulations. Notable legal amendments, and updated information, that has been recently circulated, with respect to REITs in Vietnam, is as follows: November 24, 21: amendment of, and supplementation to, a number of articles in the Securities Law ( Amended Securities Law ) (1), which will take effect as of July 1, 211, provide: A short definition of Real Estate Investment Fund, which means a securities investment fund which is substantially invested into real estate ; The limitation of 1% of total asset value being invested into real estate by a closed (public) fund will be withdrawn with respect to real estate investment funds; January 211: the Ministry of Construction submitted an important proposal to the Government regarding Housing Development Strategies until 22, with a vision to 23: REITs should be one of the capital mobilising channels for the housing market in Vietnam; The legal framework construction to establish and operate REITs should be planned and completed soon; Implicated legal framework for REITs: 1% portfolio investment on real estate is allowed; Tax incentives; and Safeguards including specific criteria for human resources, capital requirements and prudent ratios, risk management and a reporting regime; March 1, 211: in a meeting with the Vietnam National Real Estate Association, Nguyen Tran Nam, Deputy Minister of the Ministry of Construction, said that Ho Chi Minh City is implementing a pilot program for building Real Estate Investment Funds; REIT legislation is common across Asia with Hong Kong, Japan, Malaysia, Singapore, South Korea, and Taiwan already having such schemes. (1) Law No.62/21/QH12 on revision and supplementation to some articles of Securities Law 26, adopted by the National Assembly of Vietnam on November 24, 21, and will take effect on July, 1 211 ( Amending Law for Securities Law ); Article 1 clause 3. 211, CB Richard Ellis, (Vietnam) Co., Ltd. MarketView HANOI April 211
MarketView HANOI For more information regarding this MarketView or to find out more about any aspect of our services, please contact: CB Richard Ellis (Vietnam) Co., Ltd. RESEARCH & CONSULTING Marc Townsend, Managing Director m. 84 93 6 79 e. marc.townsend@cbre.com Nguyen Thanh Tuyen, Associate Director m. 84 94 193 292 e. tuyen.nguyen@cbre.com Hanoi Nguyen Minh Tuan, Associate Director m. 84 93 469 786 e. minhtuan.nguyen@cbre.com Ngoc Le, Publications Manager m. 84 98 6666 35 e. ngoc.le@cbre.com 211 CB Richard Ellis (Vietnam) Co., Ltd. This report has been prepared in good faith and with due care by CB Richard Ellis (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 CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis. 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 sub-divided 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: Net Absorption = new completions + vacancy figures at the beginning of period - demolition - vacancy figures at period-end Rent 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.