hcmc market insights q32015 (english version)

PERFORMANCEAverage net asking rents for Grade A and Grad B offices remained stable over the quarter at US$26/sqm/mth.

Landlords in the CBD are starting to adjust their rents because of limited new supply entering the market in the future. Grade A and Grade B office buildings in the city center increased their net asking rent to US$40/sqm/mth and US$24/sqm/mth respectively.

Occupancy level increased to an average of 94% thanks to high rate from newly-built Vietcombank Tower and Lim Tower 2. On quarterly basis, Grade A improved its occupancy rate of 96% whilst Grade B witnessed a nominal drop to 95% due to tenant relocation.

SUPPLYThe CBD holds more than half of the city’s office supply, including all Grade A buildings and the majority of Grade B buildings. In the next 10 years, the CBD area remains the prime location for top-graded commercial office space.

As of Q3 2015, Ho Chi Minh City (HCMC) office market had approximately 2,228,361 sqm GFA from 343 projects. The total stock was relatively stable quarter-on-quarter (q-o-q) and increased 5% year-on-year (y-o-y).

OFFICE SECTORQ3 2015 | MARKET INSIGHTS

HO CHI MINH CITY

DAVID JACKSONGeneral [email protected]

PLEASE CONTACT US FOR ANY INFORMATION

Figure 1: Supply by year

ECONOMY OVERVIEwThe Vietnamese economy continued to show positive growth in Q3 2015.

GDP in Q3 increased 6.5% year on year (y-o-y), which is the highest growth rate among the six key economies of Southeast Asia. Total retail sales and consumer services in the first nine months of 2015 were estimated at VND 2,374.5 trillion, up 9.8% compared to the same period last year.

The CPI increased nominally at 0.74% y-o-y, the lowest level in the past 10 years. FDI pledges year to date, rose 53% from a year ago to $17 billion, with strong inflows into the manufacturing sector and production of export goods and the associated services sector rose 6.17% in the first nine months.

The State Bank of Vietnam issued government bonds highlight improvements in the economy showing significant yield compression with an average in Q3 of 6.7% and 7.1% for five year and ten year bond respectively.

In the long term, the economy will benefit from domestic reforms and trade liberalization as a pre requisite of Vietnam membership of the Trans-Pacific Partnership (TPP), the Free Trade Agreement (FTA) and further ASEAN integration.

www.colliers.com/vietnam

Colliers International is a global leader in commercial real estate services, with over 16,300 professionals operating out of more than 502 offices in 67 countries. Colliers International delivers a full range of services to real estate users, owner and investors worldwide, including global corporate solutions, brokerage, property and asset, management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. The latest annual survey by the Lipsey Company ranked Colliers International as the second-most recognized commercial real estate firm in the world.

This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and/or its licensor(s).

©2015 Colliers International Research

Figure 2: Average occupancy rate

*US$/sqm/month on net leasable area, excluding service charges and VAT.

OUTLOOKThe outlook for the office leasing market in HCMC over the next 5 years is more positive than the previous years. Since there will be limit office developments scheduled for completion in the short term, the current upward trend for occupancy rate is expected to be sustained in 2016. Due to the lack of alternative office space, landlords are more opptimistic on renewals for existing tenants.

DEMANDIncrease in FDI, changes in investment law and socio-economic reforms will attract more business into Vietnam. These multinational companies will strive for better quality in their offices.

Source: Colliers International Research


Figure 3: Average asking rents


HA VOSenior Research [email protected]

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PERFORMANCEAcross retail market segments, average net asking rent increased to US$59/sqm/mth. Average net rents in the CBD recorded a 3% q-o-q and 7% y-o-y respectively.

The market saw a nominal drop of 1ppt q-o-q in occupancy. Amongst the three segments, department stores have the highest rate of occupancy at 97%, shopping centers at 92% and retail podiums at 82%. Occupancy rate for shopping centres decreased by 1ppt due to new supply of Vincom Quang Trung.

SUPPLYOutside the CBD, Go Vap District welcomed 27,000 GFA of Vincom Quang Trung shopping center to the market. This is the third retail center developed by Vingroup in Ho Chi Minh City and the twelfth one across the country. SC Vivo City was officially opened at the end of Q3 2015 with 41,000 GFA entering the market.

In contrast, the CBD retail stock decreased 1.66% y-o-y as 3,500 sqm NLA of Saigon Center was officially closed for upgrading. When Phase 2 is completed in late 2016, the complex will have seven levels of retail and dining spaces spread across 50,000 sm, including a department store spanning 15,000 sqm across five floors.

RETAIL SECTORQ3 2015 | MARKET INSIGHTS

HO CHI MINH CITY

Figure 3: Total retail sales







Figure 1: Supply by type

OUTLOOK The last quarter of 2015 will welcome approximately 107,000 GFA retail space, creating changes on occupancy and rental rates. Retail supply will be ample through 2020 when over a million square meters of new supply will be added to the market. The retail market is expected to grow stronger in the long term due to recent free trade agreements.

DEMANDOn the 5th of October, agreement on the Trans-Pacific Partnership has been reached by all 12 participating members after more than five years of negotiations. Demand for retail space is projected to rise in the short to medium term as more international retailers will be interested to gaining access to the local retail sales.


Figure 2: Average rental rate

Source: General Statistics Office | Colliers International Research




GDP in Q3 increased 6.5%year on year (y-o-y), which is the highest growth rate among the six key economies of Southeast Asia. Total retail sales and consumer services in the first nine months of 2015 were estimated at VND 2,374.5 trillion, up 9.8% compared to the same period last year.




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PERFORMANCEThe review quarter recorded approximately 7,900 transactions, up 88% y-o-y. The high-end segment continued to dominate the sales volumes with 35% of all units sold in the first nine months of 2015. Compared to the previous quarter, the sales rate showed signs of slowing down as many Asian buyers avoided transactions in the “ghost month” of the lunar year and developers were slow to place bank guarantees against pre-sales payments as regulated in the 2014 Law on Real Estate Business.

The average primary sale price saw a increase of 2.5% y-o-y. On the secondary market, the price is reported to increase 3% to 5% compared to the same period last year.

SUPPLYMore than 10,000 units from 26 projects have been brought to the market in Q3 2015. Local developers take the lead in the supply pipeline whilst foreign developers account for less than 10% of residential projects in the market. Developers have started to shift their focus on the luxury apartment market segment.The review quarter recorded a growing number of high-end projects from well-known developers such as Phu My Hung, Capitaland and Novaland. Although demand for affordable housing is high the number of projects for low and medium income buyers is still limited, accounting for only 1/5 total supply.

DEMANDHCMC currently has a population of approximately 7.95 million, accounting for 8.8% of the whole nation’s population of 90.4 million people, making it the highest population city in the country.

CONDOMINIUM SECTORQ3 2015 | MARKET INSIGHTS

HO CHI MINH CITY

Figure 2: Sold units






Figure 1: Supply by District

Figure 3: Primary asking price







The city’s population is currently rising by approximately 200,000 people each year, which is equivalent to a 3% y-o-y increase. Given limited residential land within urban districts, there is a strong housing demand for the large number of city citizens in new urban and suburban areas.

OUTLOOKApproximately 60,000 units from 90 projects will enter the market from now until 2017. The luxury apartment sector will maintain growth in terms of sales volumes and new supply with interest from buy-to-let investors.





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PERFORMANCEIn Q3 2015, the primary average asking price of new launched projects continued its upward trend since the last quarter of 2014 thanks to improved economic conditions and investor confidence. The most sought-after villa projects still located in District 2, District 7 and District 9 with prices in some cases reaching to US$3,400-3,600/sqm. On the secondary market, prices remained stable due to limited supply. The sales volume improved with a growth rate of 5% q-o-q and 76% y-o-y.

SUPPLYThe review quarter recorded five new launched projects on the primary market. The existing supply pipeline comprises approximately 6,700 villas and townhouses from 51 projects. As land availability in the city center are limited, villa and townhouse projects are developed mainly in non-CBD locations. 80% of supply is focused on District 2, District 7, District 9 and BinhThanh District which have well-established infrastructure and connectivity. Amongst active emerging districts, District 9 is home for 31% market share with majority of current supply located near the Eastern Ring Road.

DEMANDAlthough condominiums have become popular with the local market recent years, landed property is still the preferred choice of housing.Moreover, landed property is one of the traditional investment channels given its long-term capital gain.

VILLA/TOwNHOUSE SECTORQ3 2015 | MARKET INSIGHTS

HO CHI MINH CITYECONOMY OVERVIEwThe Vietnamese economy continued to show positive growth in Q3 2015.











In terms of customer profile, there are two main groups of buyers. Investors prefer to purchase new launches, taking advantage of good initial pricing and end-user buyers who are are more cautious and pay more attention in developer’s brand name, construction progress and quality of the finishing.

OUTLOOKThe year-end will mark a slight rise in secondary price of compounded villa and townhouse developments since there will be no considerable new supply entering the market. Selling price of the primary market will be unchanged since current projects achieved efficient take-up rate. In the next three years, newly launched projects are expected to be on a larger scale. Stability is predicted in average asking price land lot segment in both primary and secondary market given moderate supply and increasing demand.

*Price excludes VAT

Table 1: Market Summary

Villa and Townhouse Performance Q3 2015 Q4 2015F

Absorption rate

Primary Price($US/sqm)

ConstructionSource: Colliers International Research

Figure 1: Supply by year


Figure 2: Average asking price



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PERFORMANCEServiced apartments in CBD have traditionally performed well with average rent being 37% higher than in the non-CBD area.The average net asking rent recorded a growth of 2% on quarterly basis, sitting at US$23/sqm/mth.

The overall average occupancy rate decreased 3 ppts, down to 83% q-o-q, mainly due to competition from new privately owned apartments let on a short-term basis.

SUPPLYThe market consists of approximately 4,230 apartments from 82 buildings. District 1 makes up 44% of the total supply.

This quarter saw the launch of Berkley Serviced Residences in the Gateway Thao Dien in District 2. Developed by Hamon Developments and SonKim Land, the project is scheduled to open in 2017, offering 85 fully furnished and serviced residences in one, two and three bedroom layouts.

DEMANDDemand for serviced apartments will be strengthened by the growing FDI investment to Ho Chi Minh City.

SERVICED APARTMENT SECTORQ3 2015 | MARKET INSIGHTS

HO CHI MINH CITYECONOMY OVERVIEwThe Vietnamese economy continued to show positive growth in Q3 2015.



The State Bank of Vietnam issued government bonds highlight improvements in the economy showing significant yield compression with an average in Q3 of 6.7% and 7.1% for five year and ten year bond respectfully.


Table 2: Total new supply by year

Table 3: Significant future projects under construction








OUTLOOKIn the next three years, it is estimated that the serviced apartment market in HCM City will have approximately 2,200 units from the launch of 4 new projects and 3 renovated projects. Limited supply entering the market over the next 12 months will create increases in occupancy in the current projects.

Figure 1: Market performance

Project District Grade Total units

Expected completion

Cosmo Residence 3 B 30 2015

New Pearl 3 B 120 2015

Icon 3 B 63 2016

Saigon Ascott Waterfront 1 A 222 2016

Saigon Centre Phase 2 1 A 216 2016




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