Cbre q410 HCMC Market Insights en

Market Insights from CBRE’s
HCMC Quarterly Report Q4 2010
Presented by:
Rudolf Hever Tam Le
Associate Director Financial Analyst
CBRE RESEARCH & CONSULTING CB Richard Ellis (Vietnam) Co., Ltd.
Wednesday, January 12, 2011
QUARTERLY REPORTS FOR
HCMC & HANOI
 Economic Overview
 Current Rents & Prices
 Office
 Residential for Sale
 Retail
 Serviced Apartments
 Hotel
 Investment
quarterlyreports@cbrevietnam.com  Legal Updates

Available in English and Vietnamese  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 7.2% (Dec. 31, 2009, up (50% y- (Dec. 31, 2010, up 35.2% N/A
(per Tael) y-o-y) o-y)) 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
VIETNAM ECONOMIC OVERVIEW
 HIGHLIGHTS
 Q4 2010 GDP growth rate: 7.3% y-o-y  2010 GDP growth rate expanded by 6.8%
y-o-y, higher than the target of 6.5% y-o-y
 Industrial production stayed strong, increasing by 14% y-o-y in 2010
 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
 With US$6.84 billion in FDI attraction in 2010, the real estate sector was the top
sector for attracting investment
 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
 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
 The dong remained under strong pressure to devalue. However, the USD/VND
exchange rate was kept unchanged, having being last depreciated in August
 The Base Interest Rate was increased to 9% from 8% on Nov 05, 2010  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.
HCMC ECONOMIC OVERVIEW
 HIGHLIGHTS
 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
 New FDI showed an impressive 76% y-o-y increase to US$1.83
billion in 2010
 Exports brought the city US$20.97 billion, increasing by 4.4% y-o-y
in 2010
 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%.
HCMC URBAN INFRASTRUCTURE
 HIGHLIGHTS
 In December 2010, N4 branch, the final part of Thu
Thiem Bridge No.1 was opened to traffic
 Also in December 2010, the first phase of Rach Chiec
Bridge, on the Hanoi Highway was completed
 The first phase of the Long Thanh International
airport will be built from 2018 – 2020. The second
East West Highway Extension phase will be from 2020-2035
 In October 2010, the Ministry of Transport approved
the East West Highway extension to connect to
HCMC – Trung Luong Highway
 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
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.
OFFICE
 HIGHLIGHTS
 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
 Grade A rents were US$35.06 psm per month, reflecting a 4.5%
q-o-q decline
 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
 Grade B rents dropped by 2.37% q-o-q to US$19.55
 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
 The overall vacancy increased to 17.8%, up 4.4 percentage points,
a reflection of the newly completed office stock
OFFICE
 OUTLOOK
 A significant amount of new stock, with 280,000+ sm in 2011 and
1.1million+ sm in the next 3 years
 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)
 Absorption is expected to continue to grow in 2011 when many
local companies, looking for professional working environments,
take higher quality space
 Tenants concerns towards quality and facilities of buildings, such
as car parking and space & energy efficiency, grows
 More and more single tenants - from local banks and financial
firms
Saigon M&C Tower (D.1)
 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
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.
 HIGHLIGHTS
 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)
 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
 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
 Mid-end and affordable segment still favoured
 Loan interest rate prohibitive for buyers, with mortgage rates in the
range of 18% - 20% p.a. with terms of 15 – 20 years
 Developers not only increasing advertising and marketing spend,
payment terms, incentives but must also differentiate
 As many as 79 projects that are under construction/development remain
un-launched, with developers patiently awaiting the return of buyer
confidence
 Developers more familiar with Decree 71 and Circular 16
 OUTLOOK
 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
 VND/USD complications and possible over heating of the gold
market begin to stir some interest in the property market as
investment channel again
 New regulations will be issued improving market transparency for
both developers and buyers
 M & A’s to increase, both behind close doors and publicly
Cantavil Premier (D.)  Buyers retain “wait & see” attitude hoping to see prices and loan
interest rates come down
 Trading outside of trading floors dominates the secondary market
RETAIL
• Kumho Asiana Plaza and Parkson Saigon Paragon have been excluded from the calculation as they both are going under reconfiguration.
RETAIL
 HIGHLIGHTS
 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
 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
 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
 New boutique shop grand-openings: Burberry, Cartier (Rex Arcade)
and will be followed by Chanel, Bulgari, Ralph Lauren
 Brands opened shops in the CBD fringe: G2000, Breadtalk,
Kichi-Kichi on Cao Thang Street (D.3)
 Holdover of developments: Bitexco Financial Tower (D.1)., Parkson
Saigon Paragon (D.7), Flemington – Phase 2 (D.11)
RETAIL
 OUTLOOK
 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
 Outside CBD, rents continue to decrease as landlords

Nova Sunrise (D.7)
compete for tenants
 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
 Japanese retailers surveying the market, including the
convenience store chains Ministop and Family Mart, as well
as the department store operators Takashimaya and Isetan
Rex Arcade (D.1) Mitsukoshi
SERVICED APARTMENTS
SERVICED APARTMENTS
 HIGHLIGHTS
 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)
 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
 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%.
 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
SERVICED APARTMENTS
 OUTLOOK
 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: Fraser Place: 100
• Supply will 16
double in the next three years.
 DEMAND:
• Entering 2011, occupancy rates remain high, approaching 90%
• Demand remains strong, with first signs of budget recovery
 COMPETITION:
• Fierce competition from villas and buy-to-let apartments, however
IWA Square (D.1) – 28 units housing budgets are increasing again and thus there appears to be
sustained demand in the market, particularly at the top end
3-5 STAR HOTELS
 HIGHLIGHTS
 Liberty Central (140 rooms) officially ranked 4-star
 5-star Le Meridien, Grand Extension, Novotel and Times Square are
seeing significant progress
 Pullman Hotel, Diep Bach Duong’s Senla Boutique Hotel and Eden A,
with quality equivalent to 5-star, either broke ground or cleared site
 Average occupancy rates of 3-5 star hotels increased 18% y-o-y (67%
in 2010)
 Average room rates decreased 8% y-o-y (US$82.0 in 2010)
 International tourist arrivals to HCMC, in 2010, reached approx. 3.1
million,  20% y-o-y:
• Vietnam ranks 12th in long-term tourism growth (according to
WTTC)
• Opening/renewal of many direct flights to HCMC from Paris,
Pullman Saigon Centre (D.1)
Beijing, Yangoon, Doha, Vientian
• Return of MICE and business guests
• Third Private Airline in VN (Mekong Air) began operation in
October
3-5 STAR HOTELS
 OUTLOOK
 3-star and budget hotels, with international quality, continue to
have strong performance despite fierce competition from new
supply
 Occupancy rates likely to have y-o-y increase
 Hotel to be built in a mix-used complex, with retail or golf course
 Local developers, including banks and family-run companies
show increased interest in investing into hotel sector: Ocean Bank
invests into Saigon Star City
 More brands from international operators to enter the market: Ritz
Eden A (D.1)
Carlton, Marriot, Centara, MGM Resort
 New concepts to materialise: condo-tel hotel, luxury travel
 Tourism continues to see steady growth
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.

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Market Insights from CBRE’s

HCMC Quarterly Report Q4 2010

quarterlyreports@cbrevietnam.com  Legal Updates

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

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

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

Ben Thanh Bus Station

 Outside CBD, rents continue to decrease as landlords

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