Market Insights from CBRE’s

HCMC Quarterly Report Q4 2010

CBRE RESEARCH & CONSULTING
Presented by:
Rudolf Hever Tam Le
Associate Director Financial Analyst
CB Richard Ellis (Vietnam) Co., Ltd.
Wednesday, January 12, 2011

QUARTERLY REPORTS FOR

HCMC & HANOI
ƒ Economic Overview
ƒ Current Rents & Prices
ƒ Office
ƒ Residential for Sale
ƒ Retail
ƒ Serviced Apartments
ƒ Hotel
ƒ Investment

quarterlyreports@cbrevietnam.com ƒ Legal Updates

Available in English and Vietnamese ƒ Construction Costs

2 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s HCMC QUARTERLY REPORT | JANUARY 2011
VIETNAM ECONOMIC OVERVIEW
2007 2008 2009 2010 Est. 2011f
GDP
8.5% 6.2% 5.3% 6.8% 7.0-7.51
Growth Rate (y-o-y)

Lending Rate 14%-16% 12% 12.75% 16%-17% 15%2

Down from 21% in Q3 (Late 2010)

Inflation 9.2%
8.3% 22.9% 6.9% 11.5%2
(Average, y-o-y) (Dec.10: 11.8%)

Trade Deficit US$-12.5 bil US$-18 bil US$-12.8 bil US$-12.4 bil US$-14.0 bil3

Gold Price VND17.8 mil VND26.7 mil VND36.1 mil

VND16.16 mil (Dec. 31, 2008, up (Dec. 31, 2009, up (Dec. 31, 2010, up N/A
(per Tael) 7.2% y-o-y) (50% y-o-y)) 35.2% y-o-y)

19,500
USD/VND 16,030 17,400 18,497 (Dec. 31, 2010)
19,5002
(Commercial banks) (Dec. 31, 2007) (Dec. 31, 2008) (Dec. 31, 2009) (Devalued by 5.4%
vs. Dec. 31, 2009)

USD/VND 16,070 17,510 19,470 21,010

N/A
(Unofficial market) (Dec. 31, 2007) (Dec. 31, 2008) (Dec. 31, 2009) (Dec. 31, 2010)

Committed FDI US$21.3 bil US$71.7 bil US$22.6 bil US$18.6 bil US$20 bil3

Implemented FDI US$8.0 bil US$11.7 bil US$10 bil US$11 bil US$11-11.5 bil3
Source: Historical data by GSO, 1GSO 2BMI Q1/2011 Report, 3Ministry of Planning and Investment
3 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s HCMC QUARTERLY REPORT | JANUARY 2011

VIETNAM ECONOMIC OVERVIEW

„ HIGHLIGHTS
ƒ Q4 2010 GDP growth rate: 7.3% y-o-y Æ 2010 GDP growth rate expanded
by 6.8% y-o-y, higher than the target of 6.5% y-o-y
ƒ Industrial production stayed strong, increasing by 14% y-o-y in 2010
ƒ Implemented FDI showed an improvement of 10% y-o-y in 2010, yet total
committed FDI remained negative, with a decrease of 17.8% y-o-y to
US$18.6 billion
ƒ With US$6.84 billion in FDI attraction in 2010, the real estate sector was the
top sector for attracting investment
ƒ Exports rose significantly, by 25.5% y-o-y, to US$71.63 billion in 2010 but
the trade deficit remained at US$12.37 billion
ƒ CPI surged rapidly in the last three months of 2010:
• December: +11.8% y-o-y, nearly 2% m-o-m
• Average 2010: +9.2% y-o-y
ƒ The dong remained under strong pressure to devalue. However, the
USD/VND exchange rate was kept unchanged, having being last depreciated
in August
ƒ The Base Interest Rate was increased to 9% from 8% on Nov 05, 2010 Æ
deposit and lending rates elevated accordingly. The current deposit rate is
capped at 14% per year, while loan rates are approximately 16%-17% p.a.
However, home loans remained much higher in the range of 19%-20% p.a.
4 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s HCMC QUARTERLY REPORT | JANUARY 2011
HCMC ECONOMIC OVERVIEW
„ HIGHLIGHTS
ƒ The quarterly GDP growth rate continued to increase
throughout 2010. Q4 2010 GDP growth rate rose by 13.0% y-
o-y, sending the 2010 GDP growth rate to a 11.8% increase
against 2009
ƒ New FDI showed an impressive 76% y-o-y increase to US$1.83
billion in 2010
ƒ Exports brought the city US$20.97 billion, increasing by 4.4%
y-o-y in 2010
ƒ International arrivals to HCMC surged sharply, by 28.6% q-o-q
in the fourth quarter. In 2010, the city welcomed 3.1 million
foreign arrivals, representing a y-o-y growth rate of 19.2%.

5 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s HCMC QUARTERLY REPORT | JANUARY 2011

HCMC URBAN INFRASTRUCTURE

„ HIGHLIGHTS
ƒ In December 2010, N4 branch, the final part of
Thu Thiem Bridge No.1 was opened to traffic
ƒ Also in December 2010, the first phase of Rach
Chiec Bridge, on the Hanoi Highway was
completed
ƒ The first phase of the Long Thanh International
East West Highway Extension airport will be built from 2018 – 2020. The
second phase will be from 2020-2035
ƒ In October 2010, the Ministry of Transport
approved the East West Highway extension to
connect to HCMC – Trung Luong Highway
ƒ The demolition of Ben Thanh bus station began in
the final quarter of 2010, the site will be home to
a planned Metro station
Ben Thanh Bus Station

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OFFICE

• If the two most recent Grade A buildings are excluded from the calculations, Grade A vacancy in Q4 decreased by
2.0 percentage points to 4.9% and Grade A rents were US$35.20 psm per month, down 0.9% q-o-q.

7 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s HCMC QUARTERLY REPORT | JANUARY 2011

OFFICE
„ HIGHLIGHTS
ƒ Bitexco Financial Tower, the tallest building in HCMC,
opened in October, providing 37,710 sm NLA Grade A
office space, increasing supply by19.4% q-o-q
ƒ Grade A rents were US$35.06 psm per month, reflecting a
4.5% q-o-q decline
ƒ Three new Grade B buildings, with a total of 51,020 sm
GFA, and eight new Grade C buildings, with a total of
39,729 sm GFA, were put into operation
ƒ Grade B rents dropped by 2.37% q-o-q to US$19.55
ƒ The total net absorption for 2010 was 226,970 sm NLA,
almost 50% above the 154,458 sm net absorption recorded
in 2009. Q4 2010 net absorption: 34,545 sm NLA
ƒ The overall vacancy increased to 17.8%, up 4.4 percentage
points, a reflection of the newly completed office stock

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OFFICE
„ OUTLOOK
ƒ A significant amount of new stock, with 280,000+ sm in
2011 and 1.1million+ sm in the next 3 years
ƒ Grade A Rents expected to come down to the same levels as
other regional cities such as Shanghai, Beijing (US$31-33
psm per month)
ƒ Absorption is expected to continue to grow in 2011 when
many local companies, looking for professional working
environments, take higher quality space
ƒ Tenants concerns towards quality and facilities of buildings,
such as car parking and space & energy efficiency, grows
ƒ More and more single tenants - from local banks and
financial firms
Saigon M&C Tower (D.1)
ƒ Landlords are having to be increasingly competitive with
regards to commercial terms and incentives (rent free,
parking, signage, etc) in order to attract major tenants

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RESIDENTIAL FOR SALE

• “New completion” is handover in this quarter. These units are included in existing supply.
• “New launch” is the official start of the sales period. “New launch” includes all units in a development, however, the
developer may divide the sales into numerous phases and thus not all units may come to the market at launch.

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RESIDENTIAL FOR SALE
„ HIGHLIGHTS
ƒ 9 residential projects launched sales in Q4, a total of 2,894
units, down 47% q-o-q. More than half of these were
affordable projects (US$520 – US$840 psm)
ƒ In the secondary market, high– and mid-end asking prices
were still flat with only 0.68% and 0.98% q-o-q decreases,
respectively. Affordable segment edged upwards 0.2% q-o-q
ƒ As at Q4, average prices stood at US$4,401 psm for luxury,
US$1,885 psm high-end, US$984 psm mid-end and
US$727 psm for affordable units
ƒ Mid-end and affordable segment still favoured
ƒ Loan interest rate prohibitive for buyers, with mortgage rates
in the range of 18% - 20% p.a. with terms of 15 – 20 years
ƒ Developers not only increasing advertising and marketing
spend, payment terms, incentives but must also differentiate
ƒ As many as 79 projects that are under
construction/development remain un-launched, with
developers patiently awaiting the return of buyer confidence
ƒ Developers more familiar with Decree 71 and Circular 16
11 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s HCMC QUARTERLY REPORT | JANUARY 2011

RESIDENTIAL FOR SALE

„ OUTLOOK
ƒ More affordable projects to be developed surrounding
HCMC – Dong Nai, Binh Duong and Long An. By both local
and foregin developers, including: Vinacapital, Berjaya,
Keppel Land, Posco, Capitaland, SP Setia and Gamuda
ƒ VND/USD complications and possible over heating of the
gold market begin to stir some interest in the property market
as investment channel again
ƒ New regulations will be issued improving market
transparency for both developers and buyers
ƒ M & A’s to increase, both behind close doors and publicly
Cantavil Premier (D.) ƒ Buyers retain “wait & see” attitude hoping to see prices and
loan interest rates come down
ƒ Trading outside of trading floors dominates the secondary
market

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RETAIL

• Kumho Asiana Plaza and Parkson Saigon Paragon have been excluded from the calculation as they both are going under reconfiguration.

13 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s HCMC QUARTERLY REPORT | JANUARY 2011

RETAIL
„ HIGHLIGHTS
ƒ Overall shopping centre vacancy was 8.7%, higher than
Q3 2010 by 1.9 percentage points due to the soft opening (at
65% occupancy) of Thien Son Plaza
ƒ CBD Shopping centre rents increased by 1% q-o-q to
an average of US$125.38 psm per month, this was a reflection
of the 25% increase in rents at Zen Plaza following it’s
renovation
ƒ Non-CBD rents: follow the downward trend since early 2009
by recording a further 8.6% decrease mainly driven by the
competitive rents offered at Thien Son Plaza
ƒ New boutique shop grand-openings: Burberry, Cartier (Rex
Arcade) and will be followed by Chanel, Bulgari, Ralph Lauren
ƒ Brands opened shops in the CBD fringe: G2000, Breadtalk,
Kichi-Kichi on Cao Thang Street (D.3)
ƒ Holdover of developments: Bitexco Financial Tower (D.1).,
Parkson Saigon Paragon (D.7), Flemington – Phase 2 (D.11)
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RETAIL
„ OUTLOOK
ƒ 2011 will be the year of the shophouses due to limited
retail supply in the CBD, most popular streets:
• CBD: Dong Khoi, Dong Du, Nguyen Trai, Hai Ba
Trung, Ly Tu Trong, Mac Thi Buoi
• Outside CBD: Cao Thang, Vo Van Tan, Le Van Sy

ƒ Outside CBD, rents continue to decrease as landlords

Nova Sunrise (D.7)
compete for tenants
ƒ Continued arrival of new foreign retailers, including
both food and non-food brands, coming to Vietnam by
partnering with local companies but Economic Needs
Test (ENT) remains an issue
ƒ Japanese retailers surveying the market, including the
convenience store chains Ministop and Family Mart, as
well as the department store operators Takashimaya
Rex Arcade (D.1)
and Isetan Mitsukoshi

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SERVICED APARTMENTS

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SERVICED APARTMENTS
„ HIGHLIGHTS
ƒ Q4 new supply: 111 units
• Grade B: Crescent Residence 2 (40 units, D.7) and
Lafayette de Saigon (18 units, D.1)
• Grade C: Kim Sa (19 units, D.3), AVA Residence 2&3 (26
units, D.2) and 62 Vo Thi Sau (8 units, D.1)
ƒ Rents recovering to 2008 levels:
• Average rents across all grades achieved a positive y-o-y
growth rate of 3.9%, with Grade A up 8.4% to US$32.42
and Grade B up 2.9% to US$26.64
• Sedona Suite and InterContinental Asiana Saigon
Residences achieved new pricing records, above
US$42/sm/month
ƒ Q4 is the low season but occupancy remained stable as tenants
prefer not to move during the holiday season. Q4 overall
vacancy rate again decreased 1 percentage point to 15.5%,
Grade A down 4.3 percentage points to 5.7%.
ƒ CBRE enquiries – bigger budget: 80% above US$2,500/month
from new expat staff who are looking for serviced apartments to
move in February/March
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SERVICED APARTMENTS
„ OUTLOOK
ƒ SUPPLY:
• The number of Grade C units is likely to equal that of Grade A
by the end of 2011, a reflection of the emerging trend of
boutique serviced apartments
• 2011 is forecast to see 12 new projects to come online, with
717 units:
Q1 Q2 Q3 Q4
Crescent Residence 2: 71
Mai.Har Land Apartments: 38 Thao Dien Xanh: 19
Morning Sun 2: 60 The Vista: 100 An Phu Plaza: 50
IWA Square: 28 649/95 Dien Bien Phu: 24 Icon: 186
Bach Long Apartments: 25 Saigon City Residence: 16 Fraser Place: 100

• Supply will double in the next three years.

ƒ DEMAND:
• Entering 2011, occupancy rates remain high, approaching 90%
• Demand remains strong, with first signs of budget recovery
ƒ COMPETITION:
IWA Square (D.1) – 28 units • Fierce competition from villas and buy-to-let apartments,
however housing budgets are increasing again and thus there
appears to be sustained demand in the market, particularly at
the top end
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3-5 STAR HOTELS
„ HIGHLIGHTS
ƒ Liberty Central (140 rooms) officially ranked 4-star
ƒ 5-star Le Meridien, Grand Extension, Novotel and Times Square
are seeing significant progress
ƒ Pullman Hotel, Diep Bach Duong’s Senla Boutique Hotel and
Eden A, with quality equivalent to 5-star, either broke ground or
cleared site
ƒ Average occupancy rates of 3-5 star hotels increased 18% y-o-y
(67% in 2010)
ƒ Average room rates decreased 8% y-o-y (US$82.0 in 2010)
ƒ International tourist arrivals to HCMC, in 2010, reached
approx. 3.1 million, Ç 20% y-o-y:
• Vietnam ranks 12th in long-term tourism growth
Pullman Saigon Centre (D.1)
(according to WTTC)
• Opening/renewal of many direct flights to HCMC from
Paris, Beijing, Yangoon, Doha, Vientian
• Return of MICE and business guests
• Third Private Airline in VN (Mekong Air) began operation
in October
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3-5 STAR HOTELS

„ OUTLOOK
ƒ 3-star and budget hotels, with international quality, continue
to have strong performance despite fierce competition from
new supply
ƒ Occupancy rates likely to have y-o-y increase
ƒ Hotel to be built in a mix-used complex, with retail or golf
course
ƒ Local developers, including banks and family-run companies
show increased interest in investing into hotel sector: Ocean
Bank invests into Saigon Star City
Eden A (D.1)
ƒ More brands from international operators to enter the
market: Ritz Carlton, Marriot, Centara, MGM Resort
ƒ New concepts to materialise: condo-tel hotel, luxury travel
ƒ Tourism continues to see steady growth

20 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s HCMC QUARTERLY REPORT | JANUARY 2011
For further information and
order details, please contact…
quarterlyreports@cbrevietnam.com

Q4 2010 released
Thursday, January 20

© 2011 CB Richard Ellis, 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.

21 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s HCMC QUARTERLY REPORT | JANUARY 2011