Hanoi Quarterly Report - CBRE VietnamCertain projects saw price appreciation q-o-q as high as 30%++...

CBRE RESEARCH & CONSULTANCY

Presented by:

Richard Leech Thanh Tran

Executive Director Senior ManagerCB Richard Ellis (Vietnam) Co., Ltd.

January 6, 2011

Market Insights from CBRE’s

Hanoi Quarterly Report

CB RICHARD ELLIS VIETNAM2 MARKET INSIGHTS FROM CBRE’s QUARTERLY REPORT | JANUARY 2011

VIETNAM ECONOMIC OVERVIEWHIGHLIGHTSGDP surpassed US$100 billion for the first time in 2010; annual GDP growth in 2010 reached 6.78%

In Q4 GDP growth rate increased by 7.34% y-o-y, and has increased steadily quarter by quarter

GDP per capita reached approximately US$1,160; Vietnam has improved its status from a low-income to a middle-income country

FDI projects in 2010, 969 new projects, over US$17.2 billion in registered capital

Imports US$84 billion in 2010, up 20% from 2009 exports US$76.1 billion, up 25.5% y-o-y

Price of gold increased by nearly 35% over the year

Price of US$ increased 10% in 2010

CPI increased 11.75%

At the end of 2010, the lending rate increased sharply to 20-22% per year and then fell to 16-17% while the deposit rate capped at 14%

*Figures sourced from GSO


HANOI ECONOMIC OVERVIEWQ4 GDP growth : 11.5% y-o-y

Significantly exceeded the national average GDP (approx. 7.34%)2010 GDP growth at 11% also exceeds national average (7.68%)

FDI in 2010 alone: US$180.2 million, 225 projects

Tourism: 1.23 million international arrivals in 2010, up 20% from 2009Retail sales goods and services rose 31.2% y-o-y


HANOI INFRASTRUCTUREHoa Lac – Hoa Binh

highway was approved to build, that will improve operation efficiency of Thang Long Boulevard, reduce the congestion on National Road 6.

National Road 6 (Ha Dong – Xuan Mai section) is preparing to expand and renovate

Progress of Extended National Road 5 has shown good clearance and construction progress


HANOI INFRASTRUCTURE

Progress on Ring Roads

Ring Road 1: Dong Mac – Nguyen Khoai is prioritized to be cleared in 2011 and completed in 2012

Ring Road 2: Vincom offers to build Vinh Tuy – Nga Tu So Sky Road

Ring Road 3: Pham Hung road will be expanded. Sky Highway is under construction from Khuat Duy Tien to Linh Dam

Ring Road 4: Detailed master plan is proposed

Obstacles of Cat Linh – Ha Dong railway project are removed. Expected completion in 2015Long Bien – Bat Trang road was finished construction, increase traffic flow between Hanoi and Hung Yen


CONDOMINIUM FOR SALELe Van Luong Residential

Cleve Canal ParkMulberry Lane

302 Cau Giay The Pride

HIGHLIGHTSQ4/2010 new supply was 50% higher than Q3

Good secondary price increase in all market segments, against the stable price trend in Q1-Q3

Market demand continues to favor low & mid-end products, while most high-end & luxury products continue to experience slow sales

Developers’ reactions to changing market conditions:

Developers have been more aware of Decree 71 and Circular 16 and their implications

New high-end projects adopt a wait and see attitude. More pre-sales strategies are employed to study market sentiment and gauge demand

Launched high-end projects continue offering incentives to boost sales and diversify their sales techniques

More developers, including foreign ones, express interests in affordable products

Interest rates increased markedly, reducing funds available for property market

Poor performance of stock market, large fluctuations of gold price and VND/USD exchange rate, making property market a safe investment channel


CONDOMINIUM FOR SALE

Current classification of condominium was heavily based on price with consideration of location, quality, brand…- E.g by price: luxury (>$2.500 psm), high-end (US$1,400-$2,500) mid-end (US$800-$1,500) low-end (<$800 psm)

Ciputra L Le Van Luong ResidentialsRoyal City

To ta l s upp ly (un its) 2 ,186 14,774 47,864 12,403 77,227

Ne w su pp ly (u ni ts) 0 841 1,868 132 2,841

Average se con da ry as kin g p r ic e (US $ p sm) exc lu siv e o f 10% VAT

3,234 1,978 1,455 1,090 1,939

% chan ge in se con dary a skin g p r ic e (q -o-q ) 4.4% 4.4% 8.7% 11.2% 6.1%

% chan ge in se con dary a skin g p r ic e (y-o -y) 5 .5% 8.0% 11.8% 20.7% 9.3%

MA RK ET S N AP SHO T , Q 4 2010

CO N D OM IN IUM S LUX UR Y H IG H-EN D M ID-EN D T O TA LLO W -EN D


CONDOMINIUM FOR SALENEW SUPPLY

New supply in Q4: 2,850 units, ~ 50% higher than Q3Q4 is usually the peak time for launching projects since demand is highDevelopers, after a waiting period following Decree 71 and Circular 16, have been more well prepared to launch their projects

By district:Ha Dong (Le Van Luong Residentials, Hanoi Times Towers) comes back to holding top market share after being inactive in Q3.Cau Giay (Green Park Tower) maintains an important residential market

By contract type:Half projects are under capital contribution contract, which is subject to 20% limitThis anticipates large new launch in 2011 when these projects complete foundation and can release remaining 80% to the market


CONDOMINIUM FOR SALESECONDARY PRICES

Q4: Price increase in all segments, against stable price trend in first 3 QsHighest growth in Low-end and Mid-end: 11% & 9% respLuxury & High-end: 4.5% each

Mostly due to operational and newly handed-over projectsCertain high-end projects experienced price reduction

Reasons for general price increase:Many projects were handed over to buyers in Q4. Price increase at those projects can be up to 20%Q4 is usually the most active period in the year: people want to settle down before the year end

DEMANDDemand for low & mid-end products continues to dominate. Sales rate can be up to 100%

Le Van Luong Residentials: 836 units, sold out within 1-2 days after launch. Majority is small 50-60 sm units, priced at VND 1-1.5 billion each

Demand for high-end quality products is also good (Royal City & Ciputra)These 2 developers have established success in operational projects


LANDED HOUSES – MARKET BRIEFSCleve Canal ParkMulberry Lane

302 Cau Giay The Pride

HIGHLIGHTS

All districts of Hanoi observed price appreciation throughout 2010. In Q4 alone, prices of landed

houses in Hanoi grew at 12-15% on average across all districts q-o-q

Strongest increases observed in:

New urban areas in Long Bien – Gia Lam District (~25% on average q-o-q)

New urban areas in the west such as Ha Dong District (~18% on average q-o-q)

Certain projects saw price appreciation q-o-q as high as 30%++ (Van Phu NUA and Van Khe NUA)

Given such growth rate, landed property was a profitable and safe channel of investment in 2010,

compared to other popular channels such as currency/gold trading and securities market


OFFICE


OFFICE

Two projects opened in Q4

In the CBD: Sentinel Place (Grade A) 7,000 sm NLA

In the West: Lilama 10 Tower (Grade B) 12,700 sm NLA

Rents stabilized in both Grade A & B

Buildings with recent renovation see strong increase in asking rents (Central Building, Vincom)

Asking rents decrease in most other buildings

HIGHLIGHTS

Sentinel Place Lilama 10


OFFICEVACANCY

Grade A: dropped from ~25% to ~18% q-o-q, leases in Charm VitTower and BIDV Tower

With out BIDV Tower & Charm Vit Tower, vacancy of Grade A remain stable about 3% in last two years.

Grade B: stable with 15% (last quarter: 16%)

NET ABSORPTIONNet absorption was over 32,600 sm in Grade A & B.

GRADE A 58% GRADE B 42%

32,600 sm is the most space taken up since 2007


OFFICEFUTURE SUPPLY

Quantity: In the Midtown & Western submarkets, supply will continue to rise

Crown Complex (Q1 2011)

Keangnam Hanoi Landmark Tower (Q4 2011)

Quality: In the CBD, renovation activities are being done (Vincom City Towers, Central Building)


OFFICEDEMAND

Tenant movement

Enquiries for large spaces are stronger

Expansion to the West

Major Industries

Banks: Shinhan Bank, HSBC, First Bank

Insurance: Korea Life Insurance, Ace Life Insurance

Education: Concordia Int’l School Hanoi

Technology: FPT, S-TelecomEnquiries

Most interests in area under 250 sm

More enquiries for area from 500 sm and above


RETAIL

MARKET SNAPSHOT, Q4 2010

DEPARTMENT STORE SHOPPING CENTRES

RETAIL LOBBIES

Total supply (NLA, sm) 11,000 97,171 10,310

New supply (NLA, sm) 0 0 0

Vacancy rate (%) 0.00% 13.62% 8.73%

Average asking rents (US$ psm per month)

CBD - $54.52 $65.64

% change (y-o-y) - 0.04% 14.58%

% change (q-o-q) - 0.00% 0.00%

Non-CBD $54.00 $34.00 $19.00

% change (y-o-y) 0.00% 12.53% 5.56%

% change (q-o-q) 0.00% -5.81% 0.00%


RETAILHIGHLIGHTS

Strong retail sales in 2010: y-o-y growth exceeded 30%

No new stock, total supply remained at 118,480 sm, 14% y-o-y

Major announcements and progress:– Hang Da Galleria finished leasing long term & began to lease for

short term. Scheduled to open in April 2011– Pico Mall was 70% pre-leased, planned to open in March 2011– Vincom City Tower is under strong renovation process

Brands continued exposure:– Fashion : Aldo, Dr. Martens, Guciano, Chopard– F&B : KFC, BBQ Chicken, SumoBBQ– Electronic marts : Pico Plaza, E-Best, Huong Anh– Cinema : Platinum Cinema (The Garden)

Average vacancy rate increased slightly due to tenants’ movement in Grand Plaza

Average rental rate: US$45.58 psm per month; Non-CBD: US$36.60 psmper month, 3.8% q-o-q (Grand Plaza: down 18% q-o-q: supporting policy applied for tenants)


RETAILOUTLOOK

Market gets more familiar with shopping centres

Shophouses still popular in CBD area

Shopping centres in the West need to adopt long term vision and more aggressive marketing and leasing strategy

With continued growth in demand and heavy residential development, sizeable shopping centres will become a more prevalent retail format in the future

F&B brands and electronic retailer chains expected to continue aggressive expansion plans. Besides, fast fashion may emerge as a new trend in the near future

Xuan Thuy Tower Bac Ha Plaza

Hang Da Galleria – Hoan Kiem District


SERVICED APARTMENTS

Note: Supply only accounts for projects of 30 units or above.

MARKET SNAPSHOT, Q4 2010International operator Self-managed Total

Total Supply (units) 685 1,436 2,121New Supply (units) 0 231 231Vacancy Rate (%) 6% 23% 15%Vacancy Rate (%), excl. Grand Plaza 6% 12% 7%Average asking rents (US$ psm per month, excluding service charge and VAT) as at Q4/2010 $41.35 $27.86 $31.15

% change (q-o-q) 0.3% 5.2% 2.8%% change (y-o-y) 4.2% 7.2% 4.9%


SERVICED APARTMENTSHIGHLIGHTS

Grand Plaza Serviced Residence - 180 units opened in Q4

Vacancy rate generally decreased in Q4

7% on average excl. Grand Plaza (down from 9% in Q3/2010)

6% in internationally operated projects (down from 12% in Q3/2010)

Including Grand Plaza however, vacancy rate is at 15%

Average asking rents: US$31.15 psm per month - little change

Substitute markets, i.e. buy-to-let apartments in large projects, emerged

Number of inquiries increased in 2010

Tenants’ top concerns include: location, facilities, communities


SERVICED APARTMENTSOUTLOOK

New Supply in 2011:– Early in 2011: Crown Complex - 135 units and Hoa

Binh Green Apartments - 40 units expected to start operation in Q1/2011 (original opening scheduled for Q4/2010)

– Later in 2011: Significant supply expected to open includes Keangnam Hanoi Landmark Tower - 378 units and Elegant Tay Ho - 100 units

Increasing competition from substitute markets

Market rents expected to trend down due to increasing supply from the Western area, but rents will likely remain unchanged in the CBD, Tay Ho and Ba Dinh in the short term

Sedona Suites Serviced Apartment


HOTELS

MARKET SNAPSHOT, Q4 2010

5-STAR 4-STAR 3-STAR TOTAL

Total stock at the end of Q4 2010 (rooms) 3,130 1,510 1,978 6,618

New supply (rooms) 0 106 0 106

Average Room Rate (US$/night) $126.22 $67.57 $38.55 $77.45

% change (y-o-y) 0.98% -9.97% -6.88% -3.77%

% change (q-o-q) 6.31% -1.03% 0.78% 3.15%

Average Occupancy Rate (%) 68.24% 64.55% 63.79% 65.53%

% change (y-o-y) 5.76% 10.13% 2.31% 6.07%

% change (q-o-q) 10.24% 4.70% 2.40% 5.78%

Revenue per Available Room (US$/night) $85.50 $43.13 $24.46 $51.03

% change (y-o-y) 9.28% 5.51% -3.21% 6.03%

% change (q-o-q) 25.11% 6.09% 4.29% 15.58%


HOTELSHIGHLIGHTS

New hotel: Silk Path (106 rooms, 4-star);

Grand Plaza Hanoi (300 rooms) officially ranked 5-star

Sofitel Legend Metropole Hanoi voted as Top 4 city hotels in the world by Ciga Aficionado Magazine, following earlier award: Top 10 Best Leisure Hotels & Resorts in Asia by Smart Travel Asia

Tourist arrivals to Hanoi in 2010: – International: 1.23 million, 20% y-o-y. Hanoi contributed 24% int’l

arrivals throughout Vietnam in 2010– Domestic: 7.39 million, 10% y-o-y

Average occupancy rate & RevPAR increased q-o-q and y-o-y across the board. Sofitel Plaza Hanoi & Sheraton Hanoi saw the largest increases of over 20% y-o-y

Average room rate (ARR):– 5-star: slightly increased y-o-y. Hanoi Horison & Sofitel Plaza Hanoi

experienced the sharpest rises in ARR (19% & 16%, respectively)– 4-star & 3-star submarkets decreased y-o-y across the board


HOTELSOUTLOOKLarge new supply in 2011: 184 rooms in CBD, over 1,000 rooms in the west

– Hotel de l’Opera Hanoi (CBD, 107 rooms)– Oriental Pearl (CBD, 87 rooms)– Crowne Plaza West Hanoi– Grand Plaza Hanoi – Keangnam Hanoi Landmark Tower

Grand Plaza Hanoi is the first test case for the many high-end hotels planned around Pham Hung

Hotels will move into more defined niches: business travelers booking out west and tourists focusing on Hoan Kiem

New and existing international hoteliers are competing aggressively for new projects in strong locations

Unbranded hotels will face stronger competition

Success at many 5-star hotels will depend on their ability to attract MICE & business travelers: conference facilities, corporate rates, and access to businesses

Silk Path Hotel – Hoan Kiem District


For further information and order details, please contact….

[email protected]

THANK YOU!!!

© 2009 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.

Hanoi Quarterly Report - CBRE VietnamCertain projects saw price appreciation q-o-q as high as 30%++...

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