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THE VIETNAM RETAIL REAL ESTATE MARKETTHE VIETNAM RETAIL REAL ESTATE MARKET––
THE PERFECT MIX OF THE PERFECT MIX OF
OPPORTUNITY AND TIMINGOPPORTUNITY AND TIMING
Presented by:Presented by:Mr. Richard Leech Mr. Richard Leech –– Executive DirectorExecutive DirectorCB Richard Ellis (Vietnam)CB Richard Ellis (Vietnam)
17 Nov 2008
CB Richard Ellis | Page 2
Global economic downturn
US financial crisis, sub-prime crisis spreads to Asia
Commodity prices started to retreat
Crude oil rebounds again to $59.97 per barrel (10 Nov 2008) from US$148 (Jul 2008)
Gold price: • $US1,010/ounce (Mar 08)• US$750/ounce (Nov 08)
ECONOMIC OVERVIEWGlobal Economic Environment
CB Richard Ellis | Page 3
ECONOMIC OVERVIEW
Current Situation• Strong FDI flow (US$58.3 billion of registered capital YTD)• Banks loosening credit tie for construction loans & individuals
•Lending rate: 15%, decreasing from 21%•Deposit rate: 14%, decreasing from peak 20%•Base rate: 12% (from Nov), down from peak 14% (Jul-Oct)
• CPI decreasing in the last few months• Slow construction progress
Impacts from global economy• Stock market fluctuation• Potential capital shifting from developed markets to developing markets • Diversification, spreading risk• Investors seeking different opportunities• Global unemployment, MNCs headcounts are under review
Vietnam Economy
CB Richard Ellis | Page 4
FDI (2008 YTD): US$57.2 billion
Implemented FDI capital (YTD): US$8.1 billion
ECONOMIC OVERVIEW
Vietnam - FDI Flow
FDI PROJECTS LICENSED IN 1988-2008
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
60.00
1988
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1995
1996
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1998
1999
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2001
2002
2003
2004
2005
2006
Prel
. 20
07
Q3/
2008
Bill.
US$
FDI Capital Inflows Implemented Capital
CB Richard Ellis | Page 5
Sep ‘08 m-o-m: +0.18%
lowest in the recent 17 monthsQ3 ‘08 y-o-y: +22.76%
Q3 ’08 vs. Dec ‘07: +21.87%
Est. average 2008: 25% (ADB)
ECONOMIC OVERVIEW
Vietnam – INFLATION
CB Richard Ellis | Page 6
Total retail sales of goods & services: US$42.5 billion
ECONOMIC OVERVIEW
Retail Statistics
VIETNAM RETAIL SALES AS A % OF GNI
0
100,000
200,000
300,000
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600,000
700,000
800,000
1995
1996
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2006
Prel
. 2007
bil
l. D
ong
0%
10%
20%
30%
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50%
60%
70%
Retail sales At Current Prices % Of GNI
CB Richard Ellis | Page 7
> US$ 45 billion retail sales in 2007 and growing around 20% annually
Consumer spending expected to hit > US$ 60 billion in 2010
ACCUMULATED RETAIL SALES
-
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
Jan
Feb
Mar
Apr
May Jun
Jul
Aug Sep
Oct
Nov
Dec
bil.
US$
2004 2005 2006 2007 2008
ECONOMIC OVERVIEW
Retail Statistics
CB Richard Ellis | Page 8
CONCLUSION
International retailers have not altered their long term growth strategy in Asia and are aiming to further penetrate markets across the region particularly in emerging economies such as China, India and Vietnam. However such companies are expected to be highly prudent when it comes to choosing locations and will budget rental expenditure with great caution.
CB Richard Ellis | Page 9
GROWING RETAIL SALES - Hanoi
Hanoi Income per capita approx. US$1,900 , increasing 23% year on year
HANOI TOTAL RETA IL SALES OF GOODS AND SERVICES
-
1,000
2,000
3,000
4,000
5,000
6,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Est.2008
mi l l ions US$
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
US$
Hanoi Total Retail Sales
Hanoi Total Retail Sales per Capita
CB Richard Ellis | Page 10
… be prepared for the future
Over 6 million visitors in 2007 (10m visitor arrivals projected by 2010)
HANOI POPULAT ION
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2005
2006
2007
Est. 2008
Est. 2009
Est. 2010
Est. 2011
thous. p
ers
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
Average Population Growth rate
VISITOR ARRIVALS TO HANOI
0.00
2.00
4.00
6.00
8.00
10.00
12.00
2005 2006 2007 2008_F 2009_F 2010_F 2011_F
mil.
arr
ivals
Domestic Visitor Arrivals International Visitor Arrivals
CB Richard Ellis | Page 11
WTO COMMITMENT ON DISTRIBUTION
OF RETAIL SERVICES
• Future “As of 1 January 2009, there shall be no limitation on foreign capital contribution in the
joint ventures”.
… be prepared for the future
•Currently, “Upon accession, joint ventures shall be
allowed with foreign capital contribution not exceeding
51% of the legal capital of the joint venture”.
VIETNAM 2009
•Quality locations
•EMT
•Critical mass
Challenges:
CB Richard Ellis | Page 12
KEY TRENDS AFFECTING RETAILING IN VIETNAM (1)
More established banking network with facilities / modern Point Of Sales
Retailers expand to be more ACCESSIBLE(each District in Hanoi/HCMC can easily host a large hypermarket and/or department store)
Consumers having less time to travel for their
shopping needs
Traditional retail formats (street stalls, shop houses) still being highly prominent in developing countries including
China, Indonesia, Philippines & Vietnam
The potential for MODERN RETAIL formats’ growth is HIGH
CB Richard Ellis | Page 13
KEY TRENDS AFFECTING RETAILING IN VIETNAM (2)
More international experienced retail developers are active in the market (Koreans, Taiwanese, Singaporeans, Malaysians)
A need for larger-sized shopping centres
… enhancing the shopping experience
Greater demand for new products and entertainment
Strategic Partnerships are increasingly important (previously developers needed cash, now cash & retail expertise is in demand)
a new dimension to shopping in Vietnam
CB Richard Ellis | Page 14
CONCLUSION
These trends are likely to remain in force for some time as:FDI increasesUrbanization continuesGovernment places an increasing emphasis on policies
designed to facilitate foreign investment
Many retailers and developersentering or actively evaluating
the market due to its:
SizeRecent WTO accession
Sustained strong economic growthExpanding leisure class and rising levels of
disposable incomeSize and extent of its population in their
prime spending years
CB Richard Ellis | Page 15
Total Stock ≈ 100,000 sm GLA (13 shopping centres/dept. stores) • Most are located in CBD areas (Hoan Kiem, Hai Ba Trung)
Occupancy Rate ≈ 90% • CBD shopping centres are fully occupied• Retail centres in inferior locations encounter vacancies
Rental Rate• Non-CBD: US$25 - US$60/sqm/month• Prime CBD: US$65 - US$130/sqm/month
HANOI RETAIL MARKET
Hanoi Retail Stock
CB Richard Ellis | Page 16
PRIME RETA IL RENTALS IN KEY ASIAN COUNTRIES
0
100
200
300
400
500
600
700
800
Toky
o
Hon
g Kon
g
Shan
ghai
Bejin
g
Taip
ei
Sing
apor
e
Bang
kok
Man
ila
Jark
ata
Han
oi
HCM
C
US$/s
m/m
onth
Average Prime Rental Rates (US$/sm/month) Highest Average Prime Rental Rates (
HANOI RETAIL MARKET
CB Richard Ellis | Page 17
Modern Retail centers / Population Density
Future retail projects Existing retail projects
CB Richard Ellis | Page 18
2009: ≈ 41,625 sqm
2010: ≈ 41,496 sqm
2011: ≈ 330,251 sqm of retail space • Most future retail centers are located around My Dinh area
HANOI RETAIL MARKET
Future Retail Supply
2009
2010
2011
CB Richard Ellis | Page 19
Ongoing shortage of modern, quality retail space will continue to sustain retailers’demand for shop houses
Shop houses rents in central location can be as high as US$110/sqm/month Both local and international retailers will continue to strengthen their presence to
increase market share
Tenants are becoming more savvy about retail centres
Landlords of shopping centres with less convenient location are likely to reduce asking rents and restructure tenant mix
HANOI RETAIL MARKET
Retail Market Outlook
CB Richard Ellis | Page 20
•Location: My Dinh – Me Tri, Tu Liem Dist.
(Next to the Manor Hanoi)
• Developer : Bitexcoland
•Description: An officetel / retail complex
with cinema component.
•Net Leaseable Area: 18,925sqm
•Completion: Q1/09
HANOI
THE GARDEN SHOPPING MALL
HANOI FUTURE RETAIL SUPPLY
CB Richard Ellis | Page 21
Location: 114 Mai Hac De Str., Hai Ba Trung Dist.
Developer: Vincom JSC
Concept: Luxury Apartments & Shopping Center
Number of floors: 25
3 Basements
1F-7F: Retail (Appx: 14,000sqm)
8F-25F: Residential
Ground Breaking: Q1, 2008
Expected completion of retail podium: Q4, 2009
VINCOM PARK PLACE
HANOI FUTURE RETAIL SUPPLY
CB Richard Ellis | Page 22
Location: 88 Lang Ha St., Dong Da Dist.
Developer: Hanotex
Land Area: 8,760 sqm
Gross Area: 91,466 m2
Description: 3 basements + 462 Apartments; Office
(9,340 sqm) & Retail (5,400sqm)
Ground Breaking: Nov 2007
Completion: 2010
HANOI FUTURE RETAIL SUPPLY
SKY CITY TOWER
CB Richard Ellis | Page 23
Location: Tran Duy Hung Str., Cau Giay Dist.
Developer: Charmvit Corporation
Land Area:19,689sqm
Gross Floor Area: 150,146sqm (Hotel, Office &
Retail)
Retail: 27,461sqm GFA
Expected Completion: 2010
HANOI PLAZA HOTEL
HANOI FUTURE RETAIL SUPPLY
CB Richard Ellis | Page 24
Location: Dao Tan – Lieu Giai Str., Ba Dinh Dist.Developer: Coralis VietnamNo. of floors: 63 (incl. 5 basements)Site area:14,094.00 sqmTotal gross area:253,394.59 sqm (Retail, Office,
Residential)Retail Podium (Bas5-7F): 34,682.07 sqm –
Department StoreGround breaking: 2007Expected Grand Opening: 2011
HANOI CITY COMPLEX
HANOI FUTURE RETAIL SUPPLY
CB Richard Ellis | Page 25
Location: Pham Hung Str., Tu Liem Dist.
Developer: Keangnam Enterprises Ltd.
Gross Floor Area: 579,000sqm (Retail, Office, Apartments for sales, Hotel, Serviced
Apartments)
Retail: 82,875sqm GFA (6 floors)
Ground breaking: Q3, 2007
Expected Grand Opening: 2011
KEANGNAM HANOI LANDMARK TOWER
HANOI FUTURE RETAIL SUPPLY
CB Richard Ellis | Page 26
YEN SO PARK SHOPPING MALL
•Location: Yen So Ward, Hoang Mai Dist.
•Owner & Developer : Gamuda Land Group
•Description : The Center of all commercial
activities, complimented by the festive retail,
offices, hotels and convention center.
•Land Area: 3.85 ha
•Retail NLA : 49,253 sqm (4 Storey Podium)
•Completion: 2011
HANOI FUTURE RETAIL SUPPLY
CB Richard Ellis | Page 27
•Location: Lac Long Quan, Tay Ho Dist.
•Owner: Citra Westlake
• Description: Regional shopping mall
• Net Lease able Area: 114,000 sqm
(incl. foodcourt, cinema, department store,
hypermarket)
•Expected Completion: 2011
HANOI
CIPUTRA HANOI MALL
HANOI FUTURE RETAIL SUPPLY
CB Richard Ellis | Page 28
INDOCHINA PLAZA HANOI
HANOI FUTURE RETAIL SUPPLY
•Location: Xuan Thuy, Cau Giay Dist.
•Developer: IndochinaLand
•Luxury Apartments (2 towers, 25 & 30 floors), Office (15 floors) & Retail (5 floors)
•Total GFA: 124,489sqm
•Net Leasable Retail Area: 19,929sqm
•Completion: 2011
CB Richard Ellis | Page 29
SAVICO PLAZA LONG BIEN
HANOI FUTURE RETAIL SUPPLY
•Location: Nguyen Van Linh Str., Long BienDist.
•Developer: Savico
•Concept: Hotel & Shopping Center
•Land Area: 49,900 sqm
•Retail Area: 42,000 sqm
•Completion: 2011
CB Richard Ellis | Page 30
A.T. KEARNEY’S GLOBAL RETAIL DEVELOPMENT INDEX 2008
Vietnam Tops A.T. Kearney's Annual List (2008) of Emerging Opportunities For Global Retailers.
Amongst the top 4, VN scores:Highest mark for country riskHighest mark for time pressureLowest for market attractiveness2nd highest for market saturation
Rapidly growing per capita incomeDrastic opening up of regulations for new entryAbsence of competitionStrong GDP growth rateYoung population with increased spending power
-134China
-123Russia
-112India
+341Vietnam
Change2007 Rank
2008 Rank
Country
CB Richard Ellis | Page 31
RETAIL ASIA-PACIFIC TOP 500 FOR 2008
chosen by the Asia Retail Journal (voting by readers and supply chain industries)
lists the top 500 retailers in 14 economies across Asia Pacificbased on the primary criteria of overall sales turnover and
sales turnover per sq.m
Top 500 Retailers for the year
Top 10 Retailers in each market
Top 10 Retailers in each of several retail formats
“Best of Best” – added criteria: shop design & layout,
staff training, merchandising, customer satisfaction, …
RANKING
Organiser Official Market Information Provider
Audit & Advisory Services Provider
CB Richard Ellis | Page 32
Saigon Co-op Mart, SJC & Saigon-Nguyen Kim rank among The Region’s Top 500 Retail Companies
3526Ho Chi Minh City Book DistributionFahasaBookstore
4915FPT CorpFPTHardline
491International Beverages Co (IBC)Diamond PlazaDept Store
5360Hanoi General Trade JSCHapro MartVarious
677Casino Guichard Perrachon SABig CHypermarket
90655G7 Trading & ServiceG7 MartC-Store
11678Phu Nhuan Jewelry Joint StockPNJOthers
1652Nguyen Kim Tien Trade & ServiceSaigon Nguyen Kim Shopping CenterHardline
214115Saigon Jewelry HoldingSJCOthers
25462Saigon Union of Trading CooperativesSaigon CoopVarious
2007 Sales (US$mns)
No. of outlets 2007Retailing CompanyBrand(s)Outlet Type
The Region’s top 500 Retail Companies By Country
VIETNAM
RETAIL ASIA-PACIFIC TOP 500 FOR 2008
CB Richard Ellis | Page 33
SETTING THE RENT
Market Related (Benchmarking)
• Existing projects
• Upcoming projects
• Retail Demand/Supply
Affordability
Turnover share can be
Up to 20% to 25%
of the Turnover
Turnover Analysis
• Trading density
• Turnover ratio
1. Categories
2. Time
RESEARCH!
CB Richard Ellis | Page 34
SETTING THE RENT
Market Rent
Turnover Share
Escalation
1. Trading Density2. Turnover Ratio
CHECKING!
CB Richard Ellis | Page 35
MEASURING RETAILER PERFORMANCE
Centrally located shopping centres & department stores:
Enjoy a high average rental rate (currently around US$ 60 per sqm/mth)
Prime retail rents as high as US$ 130 per sqm/mth
Retailers achieve a high gross sales revenue per sqm within CBD • Leading to (for most retailers) an affordable and sustainable rental
cost ratio to sales
CB Richard Ellis | Page 36
MEASURING RETAILER PERFORMANCE
NLA (sqm)
Category Units Rental Rate
Range (US$ / sqm / month)
Average Rental
Rate (US$ / sqm / month)
Occup. rate (%)
Average shop size
(sqm)
Trading density (US$ / sqm / month)
Rental cost Ratio (%) - % of total sales paid
to rent
120 Jeans 4 70 - 90 80 100 30 800 10%
455 Casual Wear / Unisex
13 70 – 90 80 100 35 750 10.7%
210 Men’s Wear 7 70 – 90 80 100 30 800 10% 480 Women’s
Wear 16 70 - 90 80 100 30 850 9.4%
105 Shoes 7 70 - 90 80 100 15 700 11.4 1,370 - 46 - 85 100 29.8 780 10.3%
Source: Retail Consultancy CBRE (Vietnam) – Extract from a CBD retail location in HCMC
Example:
Tenant A leases 100m2 for a fashion clothing shop.Tenant A averages US$78,000 per month or US$780.00 per square meter per
month turnover.Tenant A can afford to pay 20% rent to turnover ratio.Therefore Tenant A can pay US$15,600 per month or US$156.00/m2/mth
CB Richard Ellis | Page 37
THE FUTURE OF RETAIL IN VIETNAM - FOUR PROPOSITIONS
“… SHOPPING IS THE PURPOSE ANDDRIVER OF CHANGE…”
“… SUCCESSFUL RETAILING WILL ALWAYSMIRROR THE SOCIETY IT SERVES…”
Shift from COMMAND to DEMAND Economy
Burgeoning Spending Class
… need modern and COMPELLING RETAIL
Younger, more Aspirational Customers
VIETNAM
CB Richard Ellis | Page 38
“… SHIFT from the MATURE MARKETS to the EMERGING MARKETS”
MATURE MARKETS EMERGING MARKETS
Consolidation
Technology
New Formats
Sustainability
Pro-active Consumers
Transfer Brand Equity
Luxury (Exclusivity)
Choice
Organised Sector
Globalisation
Trained Staff
Aspirational Consumers
Local Players
Luxury (Status)
THE FUTURE OF RETAIL IN VIETNAM - FOUR PROPOSITIONS
CB Richard Ellis | Page 39
“… INNOVATION AND THE CUSTOMER SHOPPING EXPERIENCE ARE PARAMOUNT …”
REAL
VIRTUAL
MATURE EMERGING
Technology allows new thinkingNew experiences require new formats
Customers are communitiesInnovation = Oxygen
THE FUTURE OF RETAIL IN VIETNAM - FOUR PROPOSITIONS
CB Richard Ellis | Page 40
HOW GLOBAL ARE RETAILERS?
Vietnam likely to follow China: Similar characteristic as the China market 10 years agoEmerging country – High density and young population - Under supplied retail
developments - Luxury and high end brands presence
China is best in Asia and ranks in the worlds Top 10 of “most international retail markets”,with same level of International retailers presence as mature economies (US, UK, France, Italy…)
Huge influx of retailers in China, due partly to:Relaxation of restrictions on foreign investmentWTO in 2001Increase in average consumer spending
VIETNAM 2009
CB Richard Ellis | Page 41
SHOPPING MALL vs. HIGH STREET RETAIL
Quality assurance
Or Main street retail One stop shoppingHigh Street Retail Shopping Mall
More brands under one roof
Difficulty in car parkingGuaranteed car/motorbike parking
Shop by shop
Secure environment
Unsanitary streets or shops
Price Haggling
Product risk
Original products
Fun and great ambiance
Constant Temperature
Long spending time
CB Richard Ellis | Page 42
SHOPPING MALL vs. HIGH STREET RETAIL
A major metamorphosis has taken place, more and more shoppers drive further to be in modern shopping centers, instead of traditional shopping places
Advantages for developers:Pre leasing spaces before completion
Shoppers willing to spend hours or all day for the ultimate shopping experience
High street still reigns:Open-air caféTraditional historic placesShow off places
CB Richard Ellis | Page 43
Retail Management
Increased Free Cash Flow = Increased Shareholder Value
Saving Operational Expenses
•Facility Management•Best Practices•New Technologies
Increasing the Reputationof the Retail Object
•Higher Base Rents•Higher Service Charges •More Customers Coming
•Higher Hit Rate•Attracting Better Tenants
•Layout Planning•Fitting out Guidelines / Supervision•Analysis of Qualitative and Quantitative Data•Latest International Trends•Proper Merchandising / Theming•Constant Adjustment of Tenant mix
RETAIL PROPERTY MANAGEMENT
CB Richard Ellis | Page 44
Retail StageRetail Management•Proper Facilities•Theming•Events / Merchandising / Decoration•Market Information / Trends•Guidelines•Adjustment of fees, eg. TO based
Customer•Increasing Disposable Income•More free time•Rising Brand Awareness•Low Brand Loyalty•Very young•Looking for the “latest”
Tenants•Shorter Development Cycles•Higher Fitting out Costs•More expensive market entrance•More Competition•Improving Distribution Channels
RETAIL PROPERTY MANAGEMENT
CB Richard Ellis | Page 45
The collective result of seven key strategies is a value-creating framework and known as
Strategic Performance Management -> Sustainability
•Focus all operations on one strategic vision (Be a Shopping
Center, not an accumulation of shops) •Be proactive, not reactive (Research, Latest Trends) •Embrace latest Technology, Personalized Marketing, Loyalty
Programs
•Adjust Layout Plans, Tenant Mix, Cluster Merchandise
Categories
•Always improve services, Introduce NEW services
•Automate best practices, adapt international practices
•(Fitting out Guidelines, SOP) •Capture knowledge, not just data, make decisions
•within a deep context (Turnover Figures, Foot Traffic)
RETAIL PROPERTY MANAGEMENT
CB Richard Ellis | Page 46
INTERNATIONAL COUNCIL OF SHOPPING CENTERSThe Global Trade and Professional Association of The Retail Real Estate Industry
Founded in 1957
Over 250 conferences & events annually
Relationships with 25 national and regional shopping center councils throughout the world75,000-plus members
in over 90 countries, includes: shopping
center owners, developers, retailers,
investors, lender,…
To advance the development of the
shopping center industry & to establish
the individual shopping center as a major institution in the
community
CB Richard Ellis | Page 47
MEMBER BENEFITS
INTERNATIONAL COUNCIL OF SHOPPING CENTERS
Conventions & Research
Education & Publications
Events & Programs
Others
ICSC Conventions more than 75,000 developers, owners, retailers & lenders for education & deal making, management & marketing
ICSC researches global and regional economic trends to help members solve problems and increase profitability
ICSC Education: ICSC's School for Professional Development, University of Shopping Centers, & Other educational programs
ICSC Bookstore: A full line of more than 75 books, manuals, packets and audiocassettes
ICSC Magazine, Newspaper & Newsletter: Shopping Centers Today, Value Retail News, SCT Xtra ICSC SmartBrief, EuroBrief, AsiaBrief and the SCT Newswire.
Government Relations
Specialized Conferences
Deal Making
Expositions
Idea Exchanges & RegionalConferences
Accreditation & Certification
Awards Program
Public Relations
Regulatory & Legal Guidancepublish the Shopping Center Legal Update
ICSC: A Global Associationprovide unparalleled global business opportunities
CB Richard Ellis | Page 48
Ha Noi office
12A floor, Vincom City Towers191 Ba Trieu
Hai Ba Trung District
Ho Chi Minh City office
1301, Me Linh Point Tower2 Ngo Duc KeDistrict 1
CB RICHARD ELLIS (VIETNAM)
Mr. Richard Leech – Executive Director [email protected]
CB Richard Ellis | Page 49
CB RICHARD ELLIS GLOBAL OFFICE
THANK YOU!
www.cbrevietnam.com