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Savills Market Research

Indochina

Market Briefing

Vientiane, Laos

Q4/2016

Laos has recently been among the fastest growing

economies in the region with GDP growth at 7% pa

over the last decade. Laos is rich in resources,

particularly agriculture, forestry, hydropower and

minerals.

In 2015, Laos attracted a total of US$1.08 billion of

foreign direct investment (FDI). The most popular

sector was electricity generation, followed by

agriculture.

Laos had considerable success in developing its

tourism industry that is now only second to mining in

GDP contribution. From 2005 - 2015, tourist arrivals

increased 15.6% pa.

Macro Indicators Unit Value YoY Growth

rate (%)

Area Square kilometre 230,612 N/A

Population (*) Million people 6.92 1.7

GDP (**) US$ billion 12.37 7.4

Registered FDI (**) US$ billion 1.08 18.7

International visitors (**) Million people 4.68 13

Source: United Nations, The World Bank, Laos Tourism Development Department.

(*) preliminary census result of 2016, (**) 2015 full year estimate

QMR Brief - Vientiane Q4/2016

0

20

40

60

80

100

0

10

20

30

40

50

Yangon Bangkok Ha Noi Ho ChiMinh

PhnomPenh

Vientiane

%

US

$/m

²/m

th

Average rent Occupancy (RHS)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Retail density Retail area

m²

reta

il/pers

on

thousand

m² re

tail

0

2,000

4,000

6,000

8,000

10,000

thousand m

2

RETAIL: Still in nascent stage

OFFICE: Higher rent, lower occupancy

SERVICED APARTMENT: Highest occupancy but lowest average rent

FIGURE 1 In Q4/2016, the total modern retail stock was approximately 85,200 m² from eight projects, almost double that of 2013. Chanthabuly district is the largest supplier with 55,800 m² or a 65% share. Thirteen future projects will supply approximately 160,500 m², most are under construction or planning with undetermined scales. With 0.10 m² retail per person, retail density in Vientiane is low compared to regional cities, representing strong potential for future growth.

FIGURE 2 In Q4/2016, the total office stock was 52,000 m² net lettable area (NLA) from 11 projects. Vientiane stock is smaller than that of other cities in Southeast Asia at only 0.6% of Bangkok, 1% of Jakarta, 3% of Ha Noi and Ho Chi Minh City, 17% of Yangon and 28% of Phnom Penh. In 2017, one project will launch in Chanthabuly district. From 2018 onwards, eight projects will come online; however, the scale of these projects is unconfirmed. Office demand from Asian tenants is expected to increase in step with higher FDI to Laos.

FIGURE 3 In Q4/2016, 10 projects in four districts supplied approximately 515 units, increasing 3% YoY. Vientian’s stock was only 3% of Bangkok’s, 13% of Ha Noi’s and 34% of Yangon’s. Up to Q4/2018, there are four new projects will available in Vientiane, one of which will supply 100 units. The developers are wholly foreign-owned enterprises (Vietnamese) and joint ventures between Laos and Chinese/Vietnamese.

Source: Savills Research & Consultancy

Source: Savills Research & Consultancy

Source: Savills Research & Consultancy

QMR Brief - Vientiane Q4/2016

0

1,000

2,000

3,000

4,000

5,000

6,000

US

$/m

2

0

20

40

60

80

100

0

20

40

60

80

100

5-star 4-star 3-star

%

US

$/r

oom

/nig

ht

ARR RevPAR Occupancy

70%

30%

Villa

Townhouse

HOTEL: Lower ARR due to large stock

APARTMENT: Lack of supply

VILLA | TOWNHOUSE: Low housing demand

FIGURE 4 In Q4/2016, there were 41 three to five-star hotels in Vientiane supplying approximately 3,100 rooms. In Q4/2016, the ARR of the three to five-star segments in Vientiane was approximately US$63/room/night; the average occupancy was 74%; RevPAR was US$47/room/night. The large stock created competition, pushing the ARR lower than prior years. Vientiane experienced higher occupancy than other provinces as it is a gateway for travelers joining overland tours. According to the World Travel and Tourism Council (WTTC), in 2016, Laos ranked 7th (out of 184 countries) with the total contribution of travel and tourism to GDP increasing 6.6 percent.

In 2017, three 5-star hotels with approximately 560 rooms are expected to open.

FIGURE 5 In Q4/2016, the total apartment stock was approximately 1,000

units. The Laos Real Estate market is growing quickly and has

attracted the attention of investors from China and other ASEAN

countries. As there is no law separating the ownership of

property from the land it is on, there are few apartment

developments.

Asking prices range from US$1,000 – US$4,000/m2. Pricing in

Vientiane is lower than other regional cities such as Yangon, Ho

Chi Minh and Ha Noi. Active projects with absorption exceeding

50%.

The Laos apartment market has great potential due to lack of

supply but faces similar challenges as other emerging markets.

FIGURE 6 In Q4/2016, the total stock was approximately 1,119 dwellings

from six projects, of which villas accounted for 70% share

Seven future projects are planned in Vientiane. Due to low

housing demand, all future projects are in planning and have not

released an implementation program.

Villa/townhouses have an asking price range from US$500 –

US$19,000/m2. As the villa/townhouse market in Vientiane only

started to develop in 2009, there are limited transactions, with

only three projects recording good absorption rates at over 50

percent.

With greater international connectivity and trade, and more

capital flowing into the economy, the demand for landed housing

will increase.

Source: Savills Research & Consultancy

Source: Savills Research & Consultancy

Source: Savills Research & Consultancy

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