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P R E S S

R E L E A S E

FOR IMMEDIATE RELEASE Tuesday, September 30, 2014


For further information:
Marc Townsend
Managing Director
marc.townsend@cbre.com
Tel: +84 8 3824 6125

CBRE (Vietnam) Co., Ltd.


Dung Duong
Associate Director
Research & Consulting
dung.duong@cbre.com
Tel: + 84 91 3381 118

CBRE (Vietnam) Co., Ltd


Unit 1201, Me Linh Point Tower
2 Ngo Duc Ke, District 1
Ho Chi Minh City, Vietnam
T 84 3 824 6125
F 84 3 823 8418
www.cbrevietnam.com

Ngoc Le
Senior Manager
Research & Consulting
ngoc.le@cbre.com
Tel: + 84 908 6666 35

CBRE RELEASES Q3 2014 QUARTERLY REPORT HIGHLIGHTS


FOR HO CHI MINH CITY MARKET
Ho Chi Minh City, September 30, 2014
Vietnams gross domestic product grew 5.62% in the first nine months of 2014. Coupled with accelerating
foreign investment, this helped to boost manufacturing and exports and helped the country to counter low
credit growth.
According to the State Bank of Vietnam, by the end of August 2014, credit to the real estate market had
expanded by 9.85% compared to the beginning of this year, higher than the credit growth for the whole
economy (5.82%) and other sectors. However, credit growth projected for the first eight months is only at
4.50% y-o-y, half of the target for 2014 despite government efforts in gradually lowering lending rates from
20% in 2011 to 13% currently.
In a consumer survey by ANZ Roy Morgan, Vietnam consumer confidence followed closely the trend of the
stock market (VNIndex), with both increasing since January. Almost 60% of responders expect economic
conditions in Vietnam and their personal family situation to improve next year. A recovery in consumer
confidence may give some grounds for optimism in terms of credit growth for the last three months of the year.
Apart from the recovery in consumer confidence, the performance of the economy is supported by investment
in the manufacturing sector, which remains the most significant sector for foreign investment, accounting for
almost 70% of total FDI. South Korea has overtaken Japan as the biggest foreign investor. Samsung has
invested nearly US$8 billion in Vietnam to date and Lotte Mart plans to double its current number of stores to a
total of 2020.
Following manufacturing, the real estate sector is ranked second in terms of a destination for FDI to Vietnam,
accounting for 11%, equivalent to US$1.2 billion. Large amounts of money are expected to flow into southern
realty. Large current projects include: Smart Complex by Lotte in Thu Thiem, HCMC (US$2 billion) and Amata
City Long Thanh by Amata in Dong Nai Province (US$530 million). There is additional investment to ports in
HCMC, which will be replaced by mixed-use projects including Saigon New Port, Khanh Hoi Nha Rong Port
and Ba Son Shipyard.
Residential for Sale
As sales improve and buyers confidence increases, developers have become more and more confident in
launching their products. Well-attended launches continued to be a feature in the third quarter of 2014
although the number of new launches showed a q-o-q decline of 8.8% owning to the inclusion of ghost
month July 27th - August 24th. With 3,104 units launched, launch supply in the review quarter increased
significantly by 95.8% compared to the same period last year. Most projects were launched in July and
September as "ghost month" mainly occurred during August.

CBRE Press Release


Page 2

Thanks to improving market conditions, prices on both the primary and secondary markets started to show
tentative improvements on a q-o-q basis. Primary prices increased from 1.0%-4.0% q-o-q and 1.2%-5.4% y-oy across all segments. The most noticeable improvement was in District 2 thanks to infrastructure improvements
such as metro line No. 1. Primary prices at some projects edged up 2%-5% compared to the previous quarter
while payment terms were shortened. The same trend was reflected in the secondary market although there
was variation in the level of price changes across segments. The increase in tenants looking for buy-to-let
options supported high-end condominium sales prices. In general, the high-end segment showed a more
positive picture than the other segments as resellers found it easy to find tenants and were confident about
capital value increases. In addition, housing is a favoured investment route for Vietnamese.
Sales volume continued on an upward trend although at a slower pace than the previous quarter. Launching
events were positively received, proven by the high number of attendees and deposits being placed for up to
50%-70% of units. Preliminary figures showed that the sales volume increased by 8.6% q-o-q and 94.8% y-o-y
to approximately 3,300 units sold. While the affordable segment continued its strong rise, the growth in highend condominiums sold was relatively modest. Buyers at high-end developments comprised a high proportion
of investors (either buy-to-let or capital gain investors) who often try to avoid selling or buying houses in "ghost
month". In contrast, end-users (and especially those on a limited budget) buy a house whenever they are able
to obtain finance. Commenting on the market, Ms Duong Thuy Dung, Head of the Research and Consulting
Department, noted: It has been a long, seven year slog with disappointments and broken promises on house
delivery. However, recent positive sales results and busy launching events suggest that we have now arrived at
a point where the worst of the market is behind us.
Looking forward, further improvements in both prices and sales are expected given the current positive picture
and support from expected lower lending rates, more targeted products and improving economic conditions.
HCMC Condominiums for Sale, Price Changes
40%
30%
20%
10%
Primary
Price Change

0%
-10%

2010

2011

2012

2013

2014

-20%
-30%

Primary price: Convergent


Secondary price: Divergent

6%

4%
2%
Secondary
Price Change

0%

-2%

2011

2012

2013

2014

-4%
-6%

Luxury

High-end

Mid-end

Affordable

Source: CBRE Vietnam, Q3 2014.

Office market
Given that no new Grade A and B properties were completed during Q3 2014 and demand keeps being
observed in the market, vacancy levels in the Grade A and B markets were continuously reduced in the review
quarter. Vacancy improvements were observed across all sub-markets both on a yearly and quarterly basis. As
of the end of Q3 2014, the Grade A and B vacancy rate decreased by 0.6 pps q-o-q and 3.6 pps y-o-y.

CBRE Press Release


Page 3

Ms. Dung added: Decreasing net absorption has been recorded in the market during the last few quarters.
However, this should not be interpreted as showing decreasing demand only but also an issue on the supply
side. As less office space becomes available, tenants find it more difficult to find suitable leasing options. Given
that Vietcombank Tower will be likely launched at the beginning of next year, it is expected that net absorption
will increase as this new property will attract tenants who have been waiting to expand their workplaces or
upgrade to a prime location.
The office market in Q3 2014 continued to show an improvement in average rent. Rents were either stable or
increased at most buildings. Average rent showed a remarkable improvement with Grade A increasing by
3.7% y-o-y, 1.8% q-o-q and Grade B increasing by 2.2% y-o-y and being quite stable as compared to the
previous quarter.
Based on the number of enquiries that CBRE received in Q3 2014, less demand came from new entrants to the
market and existing tenants who wish to expand. Companies coming from US dominated the market with
more than 50% of leasing enquiries. Companies providing financial or consulting services are still the most
active occupiers in the market with a contribution of nearly 31% of total enquiries received.
Future projects have maintained good construction progress during the quarter. Notable new supply will
predominantly be located in decentralized submarkets such as District 3 (Lim Tower 2), District 10 (Viettel
Office and Trade Center). Vietcombank Tower is the only notable office project located in the CBD. A large
proportion of new supply will be owner-occupied. For this reason, the market will be unlikely to suffer an
increasing burden from new competitors and landlords may maintain a position of strength.
AVERAGE ASKING RENT
(US$/sm/month)
GRADE B

VACANCY RATE
(%)

GRADE A

GRADE B

Q3
2014

GRADE A

Q3

Q2

2014

Q2

Q1

Q1

Q4

Q4

Q3

Q3

2013

2013
Q2

Q2

Q1

Q1

Q4

Q4

Q3

Q3

2012

2012
Q2

Q2

Q1

Q1

Q4

Q4

Q3

Q3

2011

2011

Q2

Q2

Q1

$35 $30 $25 $20 $15 $10 $5

Q1

$0 $0

$5 $10 $15 $20 $25 $30 $35

50%

40%

30%

20%

10%

0%0%

10%

20%

30%

40%

50%

Source: CBRE Research, Q3 2014

Retail
In term of leasable area, more than 60% of retail new openings in the third quarter are from fashion and
accessories, followed by the F&B sector with 28%. New retail entries included Marks & Spencer opening a
1,200 sm flagship store in Vincom Center B and Caf Benes first store in Dong Khoi Street, District 1.
Both occupancy rates and CBD retail rents showed improvements. The average rent of shopping centres in the
CBD increased 6.7% y-o-y if the Saigon Tax Trade Center is taken out of the sample. This shopping centre
officially closed on September 25th, 2014 to provide space for a 40-storey skyscraper. The building is planned
to have five floors and 1.5 basements for a shopping centre component with over 40,000 sm GFA.

CBRE Press Release


Page 4

Non-CBD rents continued to trend downward as retail podium outlets made efforts to attract tenants. Looking
forward, there are a number of future projects in decentralised areas which are expected to complete or open
in the next two years including: Sunrise City Phase 2, Thao Dien Pearl and SC VivoCity. These new projects
may put non-CBD rents under pressure.
According to a CBRE survey, planned future retail developments in HCMC in the next two years are only 50%
of the levels expected in Manila and Singapore and 12% - 15% the levels expected in Tokyo and Bangkok. This
will help to support rental levels in HCMC, especially in CBD areas.
HCMC Retail, Historical performance
AVERAGE ASKING RENT
(US$/sm/month)

NON-CBD

VACANCY RATE
(%)

CBD

Q3

Q4
Q3
Q2
Q1
Q4
2012

20%

40,000

14%

20,000

8%

Q3
Q2
Q1

2%
2012

Q4
2011

Vacancy rate (%)

Q1

2013

60,000

Q2

Net absorption (NLA, sm)

2014

2013

2014

Q3
Q2

(20,000)

-4%

Q1

110

90

70

50

30 30

50

70

90

110

Net Absorption (sm)

Vacancy Rate (%)

Source: CBRE Vietnam, Q3 2014.

Serviced Apartments
The third quarter of 2014 saw only one small-scale project of 14 units opening in District 2. With such limited
new supply, the market started to show some improvement. Both Grade A and B achieved rents stopped their
downward trend and edged up by 0.3% and 0.5% q-o-q respectively. At the end of the review quarter, Grade
A rents achieved US$31.60 psm per month while Grade B achieved US$25.09 psm per month.
The third quarter was the start of the new school-year and as usual, the number of Western tenants increased.
In addition, it is encouraging to witness the return of deep-pocket tenants whose housing budgets range from
US$6,000 to US$10,000 per month, mostly from Switzerland. The last time CBRE encountered this level of
budget was four years ago. These high-budget tenants were mainly looking for villas in District 2. It is also
reported that some tenants from CBD serviced apartments have started to relocate to District 2 buy-to-let
options, which are obviously cheaper but comparable in terms of quality. Discussing this observation, Ms.
Dung said: This explains why CBD serviced apartment operators have increased the one-bedroom rate but
adjusted down the asking rents of their larger units in an effort to retain family tenants. CBRE noticed that
instead of direct discounts, operators offer more benefits such as free parking, breakfast, etc. in the lease
package. Compounded by no new supply in Grade A and Grade B for one year, both grades saw an
improved net absorption. Therefore, the Q3 market-wide vacancy rate perfectly matched the long-term
average rate.
Looking forward, CBRE still expects good performance from CBD properties. It is highlighted that the top five
performers are located right at the heart of the city, including: Nguyen Du Park Villas, Indochine Park Tower,
Diamond Plaza, InterContinental Asiana Saigon Residences and Norfolk Mansion with their RevPAU (revenue
per available unit) over US$102 per unit per night.

CBRE Press Release


Page 5

HCMC Serviced Apartments, Historical performance

Rents (US$/sm/month)

$40

30%
25%

$35

20%
$30

15%
10%

$25

5%
$20

0%
2012

2013
Grade A Achieved Rent

2014

2012

Grade B Achieved Rent

2013

Current Vacancy (%)

2014
Long-term Average

Source: CBRE Vietnam, Q3 2014.

END

2014, CBRE, Group Inc. CBRE Limited confirms that information contained herein, including projections, has been obtained from sources
believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation
about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by
CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
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