Market Insights from CBRE’s HCMC Quarterly Report …...6 CBRE RESEARCH & CONSULTING MARKET...

Presented by:

CB Richard Ellis (Vietnam) Co., Ltd.

Tuesday, April 10, 2012

Market Insights from CBRE’s

HCMC Quarterly Report Q1/2012

ADAM BURY

Senior Manager

2 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s HCMC QUARTERLY REPORT | APRIL 2012

OPENING WORDS

W e r e t a i n o u r s t a n c e – T H E

M A R K E T I S N O T D E A D !

Source: VIR, March 12th, 2012

Source: CBRE Own, 1st Week January 2012

Source: CBRE Own, 1st Week April 2012


VIETNAM ECONOMIC OVERVIEW

Q 1 / 2 0 1 2 P E R F O R M A N C E

Source: General Statistics Office

Q1/2012 Q4/2011

GDP (% y-o-y) 4% 6.1%

CPI (% y-o-y, e-o-p) 14.15% 18.13%

Exchange rate (e-o-p) 20,828 20,828

Export (US$ Bn) 24.52 (23.6% y-o-y) 26.23 (31.7% y-o-y)

Import (US$ Bn) 24.77 (6.9% y-o-y) 28.9 (23.4% y-o-y)

FDI Implemented (US$ Bn) 2.5 (-0.8% y-o-y) 2.8 (-5.1% y-o-y)

International Arrivals (million arrivals) 1.9 (24.5% y-o-y) 1.7 (29.3% y-o-y)

Retail and Services Turnover (trillion dong) 569.7 (21.8% y-o-y) 611.5 (47.2% y-o-y)

CPI, VN (% y-o-y))

CPI, VN (% m-o-m)

Refinancing rate (%)

Rediscounting rate (%)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

5

10

15

20

25

Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12

CPI (%

m-o-m

)

CPI

(% y

-o-y

) /

Inte

rest

rate

s (%

)

Inflation surged

Monetary controls took effect

Monetary controls

on interest rates


Inflation continuing to trend down, possibility of

upward revisions remain;

Petroleum prices increased 10.1% compared to

the previous adjustment, leaving more pressure

on CPI in the second quarter;

• March CPI recorded the lowest m-o-m

increase since January 2011 at 0.16% m-o-m,

(or 14.15% y-o-y).

• Bounce back in the stock market, in part a

reflection of decreasing inflation.


I N F L A T I O N

Time A95 A92 Chg Pct. Chg

9-Aug-10 16,900 16,400 410 2.56%

24-Feb-11 19,800 19,300 2,900 17.68%

29-Mar-11 21,800 21,300 2,000 10.36%

26-Aug-11 21,300 20,800 (500) -2.35%

29-Mar-12 23,400 22,900 2,100 10.10%

0

5

10

15

20

25

200

300

400

500

600

700

Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12

CPI (%

)

VN

Index

VNIndex CPI

0

500

1,000

1,500

2,000

2,500

3,000

300

350

400

450

500

550

4-Jan 1-Feb 1-Mar 29-Mar 26-Apr 24-May 21-Jun 19-Jul 16-Aug 13-Sep 11-Oct 8-Nov 6-Dec 3-Jan 31-Jan 28-Feb 27-Mar

Tra

din

g V

alu

e (Billions

VN

D)

VN

Index

Trading value VNIndex 2011 VNIndex Q1/2012

Petroleum Price Adjustments

Stock Index and Inflation


Positive signs with the downward adjustments

of key interest rates.

• Rediscounting rate and refinancing rate

were adjusted down to 12% and 14%

respectively.

• Deposit rate cap at commercial banks was

adjusted downward 1% to 13%

More stable USD/VND exchange rate, strict

controls on USD/gold trading remain.

Lower interest rate mortgage loans still scarce

• Still only limited signs of commercial loans

being reduced to reflect the revised interest

rates. Slight decreases of approx. 0.5% in

the beginning of 2012.

• 20% - 25% for non-productive sector and

16.5% - 20% for productive sector (SBV).


M O N E T A R Y C O N T R O L S

0

5

10

15

20

2008 2009 2010 2011 2012

Base rate Re-discounting rate

Re-financing rate


The 4% y-o-y GDP growth rate is the lowest

recorded since Q2/2009

Imports saw their lowest growth since Q4/2009

(6.9% y-o-y) resulting in low trade deficit in

Q1/2012

Real estate ranked first in FDI attraction,

uncertain if that will be disbursed in the long-

term

Bank restructuring continues to be a key topic

of conversation;

• VietinBank to issue first dollar-bond in July;

received a B+/B credit rating from S&P.

• Changes in top management at a couple

of banks

• Bank shareholders’ conflict


B U S I N E S S E N V I R O N M E N T

World Bank

Ranking 2011 2012

Ease of doing business

Vietnam 78 98

Singapore 1 1

Malaysia 21 18

Thailand 19 17

Indonesia 121 129

Protecting investors

Vietnam 173 166

Singapore 2 2

Malaysia 4 4

Thailand 12 13

Indonesia 44 46


OFFICE

Q 1 / 2 0 1 2 S N A P S H O T

* All rents are quoted on GFA, exclusive of VAT and service charges.

Source: CBRE Vietnam

GRADE A GRADE B GRADE C TOTAL

Number of buildings 9 47 240 296

GFA (sm) 304,380 805,682 812,621 1,922,683

Vacancy rate (%) 18.9% 14.1% - 15.4%

Q-o-q change (pts) -5.7 pt -3.2 pt - -3.9 pt

Y-o-y change (pts) -19.2 pt -1.0 pt - -6.9 pt

Average asking rent (US$ psm per month) $31.38 $17.64 - $21.47

Q-o-q change (%) -2.4% -2.5% - -2.5%

Y-o-y change (%) -10.0% -7.3% - -10.5%


Grade A Vacancy (%)

Overall

District 1 excl BFT & VC

BFT & VC

0%

20%

40%

60%

80%

100%

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2009 2010 2011 2012

Slight Grade A rental softening continued as landlords look to secure tenants for vacant space

– Grade A absorptions in Q1/2012 approximately 50% greater than the quarterly average

witnessed in 2011.

Delays in future supply mean that Grade A rents may be approaching a short term bottom.

Previously it was expected that four Grade A buildings would come online in 2012, currently

only one Grade A building is expected to come into operation.

President Place is expected to set a new standard with LEED certification and innovative

building management to ensure the highest sustainability credentials- others must follow.

OFFICE

G R A D E A , Q 1 / 2 0 1 2

O F F I C E

Grade A Asking Rents

(US$ psm per month)

Overall

District 1 excl BFT & VC

BFT & VC

$20

$25

$30

$35

$40

$45

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2009 2010 2011 2012


0%

5%

10%

15%

20%

25%

30%

0

20,000

40,000

60,000

80,000

100,000

120,000

DISTRICT 7 TAN BINH DISTRICT

Vaca

ncy

(%

)

NLA (sm

)

Supply NLA Vacancy

DISTRICT 7 TAN BINH DISTRICT

Supply NLA (sm) 96,263 65,500

No. of buildings 9 3

Occupied space (sm) 72,559 64,454

Vacancy (%) 24.6% 1.6%

Rent (US$/sm/month) $13.13 $12.85

First appear (year) 2003-2005-2009 2002-2007-2008

3-km population (people) 274,000 838,360

Area (sq km) 38 36

Future Supply (end 2013) 52,886 46,526

OFFICE

S U B U R B A N H U B S

Tan Binh has extremely low

vacancy compared to District 7

Office rents are similar

Why – POPULATION?

Within 3 km of Etown,

approximately 838,360 residents

Within 3 km of Phu My Hung,

approximately 274,000 residents


RESIDENTIAL FOR SALE

Q 1 / 2 0 1 2 S N A P S H O T

All prices are quoted exclusive of VAT and service charges.

•“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.


LUXURY HIGH-END MID-END AFFORDABLE TOTAL

Total supply (units) 504 15,548 13,406 15,075 44,533

New completion (units) 87 0 364 862 1,313

New launch (units) 0 0 648 0 648

Secondary market - Average asking price (US$ psm) $3,960 $1,763 $902 $712

Q-o-q change (%) -4.0% -2.4% -1.1% -1.1%

Y-o-y change (%) -9.4% -5.0% -6.3% -2.1%


Asking prices, across all sectors remain flat on the q-o-q basis;

Incentives and discounts during negotiation remain but developers are

showing a noticeable reluctance to further reduce prices as it is felt that it

will only prove to be detrimental to buyer confidence;

Glimpses of activity in some limited sub-sectors is giving glimpses of hope

to some developers;


K E Y F I N D I N G S

Primary Market Sees a Price Stand - Off

Notable reduction in the amount of units completed in the quarter – 1,313 which was down 58.5% q-o-q and 7% y-o-y;

65.5% of completed units within the affordable sector;

Limited new launches as developers yet to enter the market reserve resources for a more optimistic market;

Secondary Market – Still Trending Down

Completions and Supply

Prices continue to fall as some property owners, typically investors of a

shorter term nature, look to liquidate their assets;

Luxury and high-end sectors see the largest price reductions. Quality of

specific residential product and ability to attract rental tenants are key

reasons for price stability (or otherwise) in the luxury secondary market;

Affordable prices continue to hold their value the strongest as purchasers are

end-users;

Units Launched and Units Completed


0

5,000

10,000

15,000

20,000

25,000

30,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

YTD

Completed Launched



S U B U R B A N L I V I N G

Does investment truly reflect demand?

TAN BINH DISTRICT DISTRICT 7

Population: over 800,000 Population <300,000

Preferred by those with cars

Known for its higher population density, its range

of schools and other civic functions, and a high-

variety of retail functions/other amenities;

Known for infrastructure and amenities

(international schools, supermarkets) –

This does not necessarily translate

into premium prices in all sectors

Prices - less volatility.

Those in the affordable sector are higher;

New urban hubs will continue to grow in prominence,

but with the city’s population swelling, traditional areas are unlikely to decline.

When the market turns there is still opportunity.

High-end Mid-end Affordable

Total Completion Unit 15,548 13,406 15,075

District 7 7287 2151 152

Tan Binh District 0 286 360

Total Units Under construction 17,670 16,338 10,872

District 7 4,508 4,436 2,507


Total Unit Under Planning 10,798 10,621 7,427

District 7 3004 844 0


TOTAL - District 7 14,799 7,431 2,659

TOTAL - Tan Binh District 972 2,980 960

High-end Prices, Secondary Market (US$ psm)


$1,500

$1,600

$1,700

$1,800

$1,900

$2,000

$2,100

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2010 2011 2012

District 7 Tan Binh District

Affordable Prices, Secondary Market (US$ psm)


$600

$650

$700

$750

$800

$850

$900

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2010 2011 2012

District 7 Tan Binh District


Supply:

• Extremely limited supply compared to the condominium market;

• Existing supply: Over 2,000 ready-built villas and townhouses vs.

over 44,000 completed condominiums across HCMC;

• District 7 makes up the majority with 48% of existing supply;

• Recent move to Phuoc Long and Phu Huu wards in District 9;

accounting for 19% of supply;

Pricing Trends:

• Shifting trends from large ‘million dollar’ villas’ to

more affordable townhouse products;

Expected trend of landed property:

• Suburban areas e.g. Districts 9 and Nha Be District, due to:

• Improving infrastructure – Long Thanh - Dau Giay Expressway;

• Lower land price compared to the developed districts 7 and 2;

• Smaller unit sizing to be become more attractive


L A N D E D P R O P E R T Y

Villa, Units Launched and Units Completed


0

0

200

400

600

800

1,000

2004 2005 2006 2007 2008 2009 2010 2011 2012

YTD

Launched Completed

Villa, Future Supply (%), 2012-2014


District 7 District 9 District 2 Thu Duc District Others


Sold vs. Unsold Units (%) , Condominium Market


Total sold unit Total unsold unit

Sold vs. Unsold Unit (%) , Landed Property Market


Total sold unit Total unsold unit

31% of launched condo’s remain unsold

whilst 13% of launched villa properties

remain unsold.

In the ten years to 1997 and the Asian

Financial Crisis, Bangkok’s residential

market grew by 1.25m units.

HCMC’s market has yet to grow by a

tenth of this!

Over Supply of Units

I t i s n o t g o i n g t o b e f a t a l !


RETAIL

Q 1 / 2 0 1 2 S N A P S H O T

All rents are quoted on NLA, average rents on the ground and 1st floor, exclusive of VAT and service charges


DEPARTMENT STORES SHOPPING CENTRES TOTAL

Total supply (GFA, sm) 113,820 377.650 491.470

Vacancy rate (%) 0% 21.6% 16.6%

CBD average asking rents (US$ psm per month) $109.35 $112.08

Q-o-q change (%) 0.0% -0.7%

Y-o-y change (%) 6.1% -10.3%

Non-CBD average asking rents (US$ psm per month) $46.56 $31.12

Q-o-q change (%) -5.5% -2.2%

Y-o-y change (%) -5.5% -11.2%


Conversion trend - The Flemington, District 11:

• 14,700 sm GFA

• 85% space was committed

• Original target: Retail service such as bank, F&B, restaurant

• NOW: Retail service, educational firms and office function

RETAIL

C o n ve r s i o n / N e w L a u n c h

& F u t u r e s u p p l y

New launch: The Vista, District 2:

• 7,000 sm GFA

• Family friendly providing a relaxing shopping &

leisure environment for family oriented

Future Supply:

• Ground breaking ceremony for the SC VivoCity shopping centre in March. 72,000 sm GFA

is expected to come online at Q1/2014

• Takashimaya and Keppel Land announce the signing of a pre-leasing agreement for the

Saigon Centre expansion on Le Loi Street;


PARKSON SAIGON TOURIST:

• Expanded their existing store on the ground and first floor

• Secured some high-profile brands such as NineWest, Easy

Spirit, and Crabtree & Evelyn among others

• Expected to complete at end of Q2 or early Q3/2012

RETAIL

S T I L L A C T I V E ! ! ! !

PROPERTY DISTRICT SIZE (SM) TENANT

Diamond Plaza 1 45 shu uemura (Japanese Cosmetic)

Shop-house, Le Loi street 1 200 Tous Les Jours (Bakery)

Shop-house, Le Loi street 1 200 Baskin Robbins ice-cream

Shop-house, Nguyen Trai street 1 70 Pedro (shoes & accessories, Singapore)

Shop-house, Vo Van Tan street 3 150 Guardian store (Singapore)

Crescent Mall 7 40 SkinFood (Natural cosmetic)

Shop-house, 3/2 Street 10 50 SkinFood (Natural cosmetic)

ACTIVE TENANTS:


GRADE A GRADE B GRADE C TOTAL

Total supply (units) 782 2,100 1,037 3,919

New supply (units) 0 52 0 52

Vacancy rate (%) 13.0% 17.3%

Q-o-q change (pts) 8.6 pp 1.1 pp

Y-o-y change (pts) 8.1 pp 0.1 pp

Average asking rents (US$ psm per month) $34.19 $25.79

Q-o-q change (%) -2.0% -1.5%

Y-o-y change (%) -9.1% -6.3%

SERVICED APARTMENTS

Q 1 / 2 0 1 2 S N A P S H O T

Note: All rents are quoted on NLA and inclusive of VAT and service charges.

*Grade B excludes one newly-renovated project quoting unrealistic rent , which is believed that it never achieves that high.

Since Q1/2012, due to the small scales of Grade C projects, only Grade A and B sectors are tracked on asking rent and vacancy rate.


*


Average Asking Rents (US$/sm/month)


$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012

Grade A Grade B

A slower quarter with vacancy increasing and asking rents trending down:

Grade A vacancy jumped to the highest rate seen in the last six quarters and no improvement

expected in the shorter term;

• One new project in the previous quarter has very low take-up due to low demand for

non-CBD serviced apartments and unwillingness of landlord to cooperate with brokers

• Diamond Plaza will start renovations in a near future;

• The construction of Saigon Centre phase 2 will reduce demand for Sedona Suites

SERVICED APARTMENTS

Q 1 - F E S T I V E S E A S O N

Vacancy Rate (%)


0%

10%

20%

30%

40%

50%

60%

2008 2009 2010 2011 2012

Grade A Grade B


Q1 IS FOR ASIAN TENANTS:

• Villa enquiries (+160sm) dropped to 15.2% (by

requested area) and 9.1% (by requested

accommodation type), the lowest rate in the last

three quarters.

• 50% of CBRE enquiries at US$1,200 - $2,500 per

month and for 60 sm – 100 sm unit.

• “Western companies doing business in Asia are now

looking to locals to fill the most important jobs”

• Asia’s Endangered Species: The Expat, Wall

Street Journal, 27/03/2012

• First signs of falling serviced apartment demand

since the Asian expatriates cost much lower than

the Westerners.

SERVICED APARTMENTS

Q 1 - F O R A S I A N T E N A N T S

Proportion of Requested Area (sm)

0 - 60

60 -

100

100 -

160

160+

Q1/11 15.1% 51.9% 23.6% 9.4%

Q2/11 18.1% 49.4% 16.9% 15.7%

Q3/11 24.5% 42.6% 17.0% 16.0%

Q4/11 15.1% 47.3% 21.5% 16.1%

Q1/12 10.6% 59.1% 15.2% 15.2%

TOP

DEMAND

* Total may not equals 100% due to rounding.

Source: CBRE Vietnam, Residential Leasing

Proportion of Housing Budget

$0 -

$1,200

$1,200 -

$2,500

$2,500 -

$3,500

$3,500+

Q4/10 10.0% 40.0% 40.0% 10.0%

Q1/11 17.9% 41.5% 29.2% 11.3%

Q2/11 20.5% 48.2% 24.1% 7.2%

Q3/11 11.7% 52.1% 26.6% 9.6%

Q4/11 14.0% 40.9% 30.1% 15.1%

Q1/12 16.7% 45.5% 25.8% 12.1%

TOP

DEMAND

Source: CBRE Vietnam, Residential Leasing


SERVICED APARTMENTS

O V E R S U P P L Y ? ? ?

– W e d o u b t i t ! ! ! Future Supply (units)


0

500

1,000

1,500

2,000

2012f 2013f 2014f 2015f

Under construction Under planning

Existing

Supply

Future Supply

Studio 1 bedroom 2 bedrooms 3 bedrooms Exchange Rate Under

Construction

Under

Planning

HCMC 3,919 1,286 2,583 $38.71 $30.42 - $38.53 $25.39 - $33.50 $22.57 - $31.47 US$1= VND20,850

(4/4/2011)

Bangkok 15,090 195 - $46.21 $36.49 $30.29 n/a US$1=THB 30.97

(4/4/2012)

- Total Stock: the total number of units, for the entire market, to compare the market size.

- Average Monthly Rents (US$ psm): charged within the CBD, including Service Charge and VAT, if applicable. Source: CBRE Thailand, CBRE Vietnam

Rental Trends, Luxury Serviced Apartment vs. Luxury Buy-to-let Condos, HCMC (US$/sm/month)


$0

$10

$20

$30

$40

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2009 2010 2011 2012

Serviced Apartment - D.1 Serviced Apartment - D.2 Serviced Apartment - D.7

Buy-to-let - D.1 Buy-to-let - D.2 Buy-to-let - D.7

??


To subscribe, p lease contact…

Q 1 / 2 0 1 2 r e l e a s e d

F r i d a y , A p r i l 2 0 , 2 0 1 2

© 2012 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.

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Market Insights from CBRE’s HCMC Quarterly Report …...6 CBRE RESEARCH & CONSULTING MARKET...

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Transcript of Market Insights from CBRE’s HCMC Quarterly Report …...6 CBRE RESEARCH & CONSULTING MARKET...