q4 2008 sector briefs hn

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Ha Noi, Viet Nam Q4/2008

For further information, please contact:Brett AshtonManaging Director

+84 8 3823 9205 – [email protected]

ho chi minh city

Savills Vietnam Ltd

18th Floor, Fideco Tower81- 85 Ham Nghi , District 1Ho Chi Minh CityVietnamT: +84 8 3823 9205F: +84 8 3823 4571

Vincent GiugeBranch Director


hanoi

Savills Vietnam Ltd.

13th Floor, Pacific Place83b Ly Thuong Kiet, Hoan KiemHanoi CityVietnamT: +84 4 39461 300F: +84 4 39461 302

This document is prepared by Savills for information only. Whilst reasonable care has been exercised in preparing this document, it is subject to change and these particularsdo not constitute, nor constitute part of, an offer or contract, interested parties should not only rely on the s tatements or representations of fact but must satisfy themselves byinspection or otherwise as to the accuracy. No person in the employment of Savills has any authority to make any representations or waranties whatsoever in relation to theseparticulars and Savills cannot be held responsible for any liability whatsoever or for any loss howsoever arising from or in reliance upon the whole or any part of the contents ofthis document. This publication may not be reproduced in any form or in any manner, in part or as a whole without written permission of the publisher, Savills .© Savills Vietnam

Limited. 2007

Apartments for Sale

Supply

Ha Noi has about 82 completed or nearly-completed or under constructionapartment projects 100% sold out and about 10 selling projects. The majorityof supply is with areas of 50 sq m to 175 sq m, with prevailing prices rangingfrom US$43,000 to US$300,000 per unit.

Asking prices in both primary and secondary market, Q4 2008

Source: Savills Research and Consultancy

Projects on the primary market in Q4 2008 include Golden West Lake,Keangnam Hanoi Landmark Tower, Ngoc Khanh Plaza, Vincom Parkplaceand Pacific Place. Most of these projects target the high-end segment, withprices ranging from US$260,000 to US$350,000 per unit (inclusive of VAT).Successful transactions in Q4 2008, however, were few. Among both the primary and secondary markets in Q4 2008, the highestasking price was around US$4,500 per sq m and the lowest sales price wasabout US$560 per sq m. Prices generally remained high in central districts,such as Hoan Kiem, Ba Dinh, and Dong Da. Outer district project prices havebeen much more volatile in the second half of 2008.

Both domestic and international economic conditions in late 2008 havedampened investment levels in the local property market. Despite severalState Bank of Viet Nam interest rate reductions in Q4 2008, lending to

developers has not resumed on a significant scale.

Demand

Irrespective of current market conditions, demand for housing is strong in HaNoi. Supply is limited and mainly exists in the secondary market with salesprices out of range for the majority of purchasers. Yet demand formedium-end and affordable housing in Ha Noi will certainly be a feature ofthe market for the medium to long term. Despite lower lending rates in Q42008, few individuals were able to obtain mortgages, which may also bereflective of a potential pool of homebuyers waiting for the residential marketto bottom out in Ha Noi. Hence, transactions are still down as purchasershave few financing options. The credit environment in 2008 has also curbedspeculation, which influenced the dramatic residential price rises of 2007.

Apartments sold and prices, 2001 – Q4 2008

OutlookDespite difficult domestic economic conditions foreseen in the short term,the fundamentals for residential property demand in Ha Noi should persist.Limited supply in the apartment for sale sector will not likely be adequatelyaddressed over the medium-term, owing to the present market downturnand tight credit conditions. Delay and cancellation in implementing projectsmay happen accordingly, and supply forecasts will likely require downwardrevision.

The majority of apartment supply in the future will likely be medium-endproducts in Ha Noi’s suburbs and New Urban Areas. Primary andsecondary asking prices for good quality projects in the city centre willprobably increase, mainly due to the shortage of supply in this area.Noteworthy high-end projects include Mipec Tower and Indochina PlazaHanoi, both of which are expected to launch on the primary market in 2009.

Source:Savills Research and Consultancy

0

2,000

4,000

6,000

8,000

10,000

01 02 03 04 05 06 07 08

Units

200

700

1,200

1,700

2,200

US$/ sq m

Apartment Sold (LHS) Primary Average Price (RHS)

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

0 50 100 150 200 250 300 350 400 450 500 550 600 650 700

Sq m

US$/ unit

0

1,000

2,000

3,000

4,000

5,000

S tan da rd un it s S ta nd ar d u ni ts wi th

better location & quality

High - end units

US$/ sq m

Lowest ask ing pr ice H ighes t ask ing pr ice






ho chi minh city

Savills Vietnam Ltd




hanoi



This document is prepared by Savills for information only. Whilst reasonable care has been exercised in preparing this document, it is subject to change and these particularsdo not constitute, nor constitute part of, an offer or contract, interested parties should not only rely on the statements or representations of fact but must satisfy themselves byinspection or otherwise as to the accuracy. No person in the employment of Savills has any authority to make any representations or waranties whatsoever in relation to theseparticulars and Savills cannot be held responsible for any liability whatsoever or for any loss howsoever arising from or in reliance upon the whole or any part of the contents ofthis document. This publication may not be reproduced in any form or in any manner, in part or as a whole without written permission of the publisher, Savills .© Savills Vietnam Limited. 2007

Offices

Supply

There are about 57 Grade A and B office buildings in Ha Noi. Therelease of one Grade A and nine new Grade B buildings in 2008brought the total stock of office buildings to approximately 390,000sq m, representing a 17% year-on-year growth rate. Top Grade Amonthly rents have now reached US$65 per sq m.

Performance of Grade A and B office buildings in Q4 2008

Grade No. ofBuildings

Stock(sq m)

Occupancy(%)

Rent (*)(US$/sq

m/ month)

Grade A 12 105,000 99 52Grade B 45 284,000 93 31

Total/Average 57 389,000 94 37

(*) Estimated average achievable rent and inclusion of service charge,exclusive of VAT, on net area. Average rent figure takes into account existing occupiers. New and reviewed leases will be much higher.

Q4 2008 ended a volatile year with occupancy falling by 1% andaggregate rents sliding by about US$1.6 per square metre. On ayear-on-year basis, however, aggregate rents increased by nearlyUS$2 per sq m, yet overall occupancy is down by about 2 percent.

Office market history

0

100

200

300

400

500

600

96 97 98 99 00 01 02 03 04 05 06 07 08

Thousand sq m

0

10

20

30

40

50

60USD/ sq m/ mth

Leased area Vacancy Average rent Source: Savills Research and Consultancy

Demand

The downturn in both the domestic economy and global markets hashad a discernible impact on demand for office space. Office tenantsare probably more price conscious in 2008. The number of leasinginquiries for office space actually began to decrease

quarter-on-quarter in 2008 and remained particularly sluggish in thefourth quarter.

Most demand is for space less than 150 sq m, perhaps a reflection ofthe predominance of SMEs and start-up foreign firms in Ha Noi. Withflexible short term and small space leasing options, business centershave also continued to solidify their position in the office market.

A cost-cutting trend is now apparent among office tenants in Ha Noi.Many large companies that previously considered expansions arenow holding back or downsizing their plans. Other companies haveopted to relocate out of the CBD after their leases expired, shifting tomore affordable locations in outer districts. Seven of ten buildingsentering the market this year were situated outside of the expensive

CBD, and five among those have been at least 90% occupied.

Outlook

By the end of 2009, over 175,000 sq m of office space is scheduledfor completion. Of this amount, nearly 95,000 sq m will be provided insecondary districts. Overall, approximately 1.5 million sq m ofadditional office space is projected to enter the market in the future.

Supply forecast

0

400,000800,000

1,200,000

1,600,000

2,000,000

2,400,000

2008 2009 2010 2011 2012 Onw ard

sq m

Current supply New supply


Future office demand from the corporate sector will probably slow asmany companies enter a period of retrenchment, primarily owing to anegative global outlook. The office market will experience volatility inthe next one to three years, and rents will likely continue to soften.Given that the market is still at the early stages of development,economic uncertainty and potential feasibility issues for projectspresently under construction will in all likelihood negatively impactthe growth trajectory of Ha Noi’s office sector.






ho chi minh city

Savills Vietnam Ltd

18th Floor, Fideco Tower81- 85 Ham Nghi , District 1Ho Chi Minh CityVietnam

T: +84 8 3823 9205F: +84 8 3823 4571



hanoi


13th

Floor, Pacific Place83b Ly Thuong Kiet, Hoan KiemHanoi CityVietnam

T: +84 4 39461 300F: +84 4 39461 302

This document is prepared by Savills for information only. Whilst reasonable care has been exercised in preparing this document, it is subject to change and these particularsdo not constitute, nor constitute part of, an offer or contract, interested parties should not only rely on the statements or representations of fact but must satisfy themselves byinspection or otherwise as to the accuracy. No person in the employment of Savills has any authority to make any representations or waranties whatsoever in relation to theseparticulars and Savills cannot be held responsible for any liability whatsoever or for any loss howsoever arising from or in reliance upon the whole or any part of the contents ofthis document. This publication may not be reproduced in any form or in any manner, in part or as a whole without written permission of the publisher, Savills.© Savills Vietnam Limited. 2007

Retail

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

2008 2009 2010 2011 Onw ard

sq m

Existing Stock Future Stock

5%21%

9%

35%

25%

5%Supermarkets &

Convenience StoresElectronics Mart

Wholesale Markets &

HypermarketsShopping Centre

Retail Podium

Retail Banking

Supply

In Q4 2008, many modern retail hubs continue to be developed around theCBD. Suburban retail development is expanding to meet the increase inresidential development outside of Ha Noi. The additional supply of about50,000 sq m of retail space brought Ha Noi’s total supply in 2008 toapproximately 345,000 sq m, representing a year-on-year increase of 17percent. The Central Business District (CBD) is still the best area forshopping in Ha Noi, owing to its prime location. Average achievable rentsin major retail areas remained static this quarter, but the next year or twoshould demonstrate Viet Nam’s potential for retail, as predicted by thecountry’s #1 ranking in the AT Kearney Global Retail Development Index published in Q2 2008.

Market share, Q4 2008

Source: Savills Research & Consultancy

In terms of area, shopping centres increased notably due to theappearance of six newcomers in 2008 including Syrena, HaproDepartment Store, Ha Thanh Plaza, Parkson, Artex Building and Kinh DoTower. Most shopping centres performed well in 2008. Seven out of tenshopping centres which Savills surveyed have been fully occupied. Rentsstill ranged from US$30-US$120 per sq m per month.

Supermarkets and convenience stores are scattered throughout Ha Noiand floor space varies from 30 to 5,000 sq m. However, large scalesupermarkets of 1,000 sq m upwards are mainly clustered in inner districtssuch as Hoan Kiem, Cau Giay, Dong Da, Ba Dinh, and Hai Ba Trung.

A retail podium typically includes luxury street-front shops located in thepodium of the building, such as Pacific Place, Sofitel Metropole and OperaBusiness Centre. Rents vary greatly in this segment, from US$30 toUS$150 per sq m, depending on building grade and location. Tenants aretypically luxury fashion brands.The total supply of wholesale centres and hypermarkets contributed byMetro Thang Long, Metro Hoang Mai, Melinh Plaza and Big C comprises

40% of Ha Noi’s total retail area, while retail banking and retail podiumcaptures less than ten percent.

Demand

High inflation and economic volatility during 2008 have stunted Ha Noi’sconsumption boom seen in recent years. Savvy retailers may thus bewaiting out the current downturn before entering or expanding in the VietNam market. Based on current projections, however, retail supply will likelylag behind demand for several years.

Outlook

From January 2009, international retailers will be able to enter the marketon a level playing field with domestic retailers, according to Viet Nam’sWTO accession commitments, implying a new level of competition,demand, and quality over the medium-term. Ha Noi should seeapproximately 100,000 sq m of new retail development by the end of 2009.Around 700,000 sq m will be added to the current stock by the end of 2011.

Future supply


CBD rents will likely be the most resilient in the Ha Noi retail sector overthe next 1-2 years. However, with a new wave of upcoming mega projectsunder development, some investors and retailers may begin diversifyingtheir locations rather than continuing to pay higher rents for prime areas inthe CBD. Whether this trend appears is not assured, as retail centres instill-developing outer districts will not likely be as competitive as morecentral properties.

About seventeen major shopping centre developments with a total area ofmore than 80,000 sq m are under construction in Ha Noi, and are expectedto be released by the end of 2009. Additionally, international chains suchas Lotte Mart, Tesco, Carrefour, and Wal-Mart are finalising plans to enterthe market.






ho chi minh city

Savills Vietnam Ltd




hanoi



This document is prepared by Savills for information only. Whilst reasonable care has been exercised in preparing this document, it is subject to change and these particularsdo not constitute, nor constitute part of, an offer or contract, interested parties should not only rely on the statements or representations of fact but must satisfy themselves byinspection or otherwise as to the accuracy. No person in the employment of Savills has any authority to make any representations or waranties whatsoever in relation to theseparticulars and Savills cannot be held responsible for any liability whatsoever or for any loss howsoever arising from or in reliance upon the whole o r any part of the contents ofthis document. This publication may not be reproduced in any form or in any manner, in part or as a whole without written permission of the publisher, Savills .© Savills Vietnam Limited. 2007

Hotels

Supply

There are 15 four and five-star hotels in Ha Noi, accounting for over 1.4million room nights yearly. The aggregate number of hotel rooms in Ha Noiis over 3,800. The average room rate at five-star hotels is now overUS$155 per night.

Hotel performance in Q4 2008

Rating No. ofHotels

No. ofRooms

AverageRoom Rate

(US$)*

AverageOccupancy

Rate

RevPAR**(US$)

5 star 9 2,829 159.7 62.5% 99.8

4 star 6 981 96.4 74.5% 71.8

Total/ Average

15 3,810 143.4 65.6% 94.0

(*) Estimated average room rates are exclusive of 5% service charge and 10% VAT.(**) RevPAR: Revenue per Available Room.

Revenue per available room, Ha Noi

1,000,000

1,100,000

1,200,000

1,300,000

1,400,000

1,500,000

2000 2001 2002 2003 2004 2005 2006 2007 2008

room nights

0

15

30

45

60

75

90

105US$

ro o m nights av ailable R evP AR


Despite softening occupancy levels and room rates over the first threequarters of 2008, both indicators showed some recovery at the beginningof the traditional Q4 high season. Room rates rose by 5% and occupancyincreased by 8% quarter-on-quarter. Yet this quarter-on-quarterperformance is modest in comparison to 2007, when room rates rose by 35percent.

Demand

Demand growth has slowed in 2008, perhaps in part owing to slowingglobal economic conditions. In comparison to 2007, the number ofinternational visitors to Viet Nam in 2008 increased by a mere 0.6 percent.This number was much lower than the government’s target of 12-17

percent growth. Again, this sluggish growth probably reflects the global

downturn, as international business trips and vacation travel plans arecurbed. It is expected that the hospitality industry in Ha Noi will continue tofeel the negative impact of the global downturn.

Outlook

The Ha Noi Administration of Tourism (HAT) targets two million foreignvisitors to Ha Noi in 2010, implying a requirement of approximately 24,000hotel rooms, 6,800 of which will need to be of four or five-star quality.

Future supply, central districts

2,000

3,000

4,000

5,000

6,000

2009 2010 Onward

# of rooms

100

120

140

160

180

US$

Exis it ng s to ck N ew Supply A RR Source: Savills Research & Consultancy

High building materials costs, as well as a tight credit policy in 2008 have hada negative impact on the capacity of many developers to implement projects,causing delays and even cancellations in some cases. Savills estimates atotal of 2,000 new four and five-star rooms will enter the market by 2010, butnearly half of these will be in Tu Liem District in Ha Noi’s western suburbs.

Demand in Ha Noi’s hospitality industry will likely remain modest as long aseconomic conditions and business sentiment are unfavorable.

Future supply, outer districts and suburbs

-

1,000

2,000

3,000

4,000

5,000

6,000

2009 2010 2011 Onward

# of rooms

0

10

20

30

40

50

60%

Exis it ng s to c k N ew Sup ply O cc upa nc y % Source: Savills Research & Consultancy






ho chi minh city

Savills Vietnam Ltd




hanoi



This document is prepared by Savills for information only. Whilst reasonable care has been exercised in preparing this document, it is subject to change and these particularsdo not constitute, nor constitute part of, an offer or contract, interested parties should not only rely on the statements or representations of fact but must satisfy themselves byinspection or otherwise as to the accuracy. No person in the employment of Savills has any authority to make any representations or waranties whatsoever in relation to theseparticulars and Savills cannot be held responsible for any liability whatsoever or for any loss howsoever arising from or in reliance upon the whole or any part of the contents ofthis document. This publication may not be reproduced in any form or in any manner, in part or as a whole without written permission of the publisher, Savills .© Savills Vietnam Limited. 2007

Serviced Apartments

Supply

Ha Noi has about 41 typical serviced apartment buildings with more thanfive units that are professionally managed, ranging from Grade A to C,available for lease across the city. This includes 2,094 international andlocal serviced apartment units. Nearly half of them are two-bedroom units.Top Grade A rents in Q4 2008 touched US$47 per sq m per month,excluding VAT.

Grade No. ofBuildings

Supply(units)

Occupancyby Unit (%)

AverageAchievable

Rent (*) (US$/sqm/mth)

A 11 1,081 86 35.1

B 17 816 93 22.5

C 13 197 89 17.8

Total/Average 41 2,094 89 27.9

(*) Estimated average achievable rent and service charge, exclusive of VAT, on net area.

Occupancy and average rents, 1996-Q4 2008


In Q4 2008, supply increased by 1% against Q3 2008 and by 24.7% y-o-y.This y-o-y increase of stock was brought about by a total of more than 400new units from some noteworthy buildings entering the market, includingSomerset Hoa Binh, Fraser Suites, Hanoi Flower Maison IV, Skyline Tower,The Thien Thai, Swan Lake, and Lakefront Residence. Average rent by sqm in Q4 2008 decreased by about 1.8% against Q3 2008 but rose by 9%y-o-y. The overall average occupancy rate in Q4 2008 was unchanged in

comparison to Q3 2008, at around 88%-89%, down by 3% y-o-y.

Demand

Demand remained stable for existing Grade A serviced apartments forlease, especially those located in Ha Noi’s CBD and the West Lake area.Given that Ha Noi’s approximately 12,500 expatriate residents are thetypical target market for this sector, high investment levels in 2008 were anencouraging sign. Yet the worsening global economic picture in Q4 2008does not bode well for market entries and foreign-invested sector over theshort- to medium-term.

Outlook

By 2009, serviced apartment supply is expected to increase by

approximately 5 percent. Due to the recent global downturn, most propertymarkets in Viet Nam are experiencing volatility in Q4 2008. Additionally,rents are already high across all grades and may ease in the coming year.Savills forecasts that occupancy in 2009 may also decrease, settling to arange of 80%-90%, taking into account future supply forecasts.

By 2011, supply should increase by another 35%, which will likely addfurther downward pressure on rents. Overall average achievable rents willprobably experience sluggish growth over the next one to three years, asrates are already considered to be high and new supply will slow take uprates.

However, the CBD market should be fairly static in terms of supply, leadingto expectations that quality projects in central Ha Noi will continue to attractpremium rents.

Total stock and new supply, 2009 onward


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2009 2010 2011 Onward

No. of units

Existing Supply New Supply

0

400

800

1,200

1,600

2,000

2,400

Q4/ 96 Q4/ 97 Q4/ 98 Q4/ 99 Q4/ 00 Q4/ 01 Q4/ 02 Q4/ 03 Q4/ 04 Q4/ 05 Q4/ 06 Q4/ 08

Units

10

20

30

40

50

60

US$/ s qm/ mth

Leased Units Vacant Unit s A verage Rent



Office Market Report

The report reviews the market for purpose built office buildings with commentary on the history, current situation and ourpredictions for the future under the sections below for Ho Chi Minh City or Hanoi.

Executive Summary Key points and overview of the office marketSupply History of the office market

Current supplyGeographical organizationAnalysis of existing office buildings with a breakdown between grades A, B, C and suburban

Demand Demand AnalysisNew and expanding foreign firmsNew and expanding local companiesOther supporting macro factors

Future Outlook Future supply and performanceInvestors Insight SWOT analysisAppendix Existing supply - Possible future supply - Glossary of termsLocation maps Location map of existing office buildings and future office building projects

Apartment for Sale Market Report

It is only in the last few years that any significant developments of apartments for sale to locals have taken place but thismarket is now developing rapidly. Our report reviews the market and the current situation regarding sale prices.

Executive Summary Overview of the local apartment for sale marketBackground History

Sale prices and market practicesCurrent Supply Geographical organization

Performance analysisFuture Outlook

Demand Demand analysisUrbanizationShift in lifestyle and changing demographics

New wealth and rising incomeImproving finance options

Payment terms Current market practicesLegal reviews Up to date review of laws relating to development of apartments Investors Insight SWOT analysisAppendix Current supply- Future supply- Assessment criteria for each grade of apartment buildingLocation maps Apartment for sale projects

Retail Market Report

The report reviews the retail market today and the potential for growth in this sector.

Executive Summary Overview of the retail market

Supply Current Supply and geographical organization including the following retail types:Shopping centres- supermarkets - department stores -street-front stores - wholesale centres -convenience stores -retail banking - car showrooms - retail mixThe main players in the retail sector

Demand Demand analysis:ConsumptionGDP GrowthDeposits and overseas remittancesTourismTransition to service industryChanging demographicsConsumer confidence

Future outlook Forecast for the futureInvestors Insight SWOT analysisAppendix Existing supply - Possible future supply- Retail glossary of termsLocation maps Current retail outlets in the city

Market Reports from Savills Research and Consultancy

Hanoi and Ho Chi Minh City



Hotel Market Report

The report reviews the hotel market with commentary on the history, current situation and our predictions for the futureunder the sections below.

Executive Summary Overview of the hotel marketSupply History and overview of the hotel market

Current supply and performance of existing hotels, occupancy rates and RevPAR

Geographical organizationRegional comparisonsResidential for lease or hotel

Demand International visitorsBusiness visitorsLocal touristsViet Kieu (overseas Vietnamese)Other supporting macro factors

Future Outlook Forecast on supply and performanceInvestors Insight SWOT analysisAppendix Existing supply - Possible future supply - Hotel/tourism glossary - Hotel classification criteriaLocation maps Location map of existing and future three to five star hotels

Serviced Apartment Market ReportThe report reviews serviced apartment market, with emphasis on serviced apartments that target the expatriate market, withcommentary on the history, current supply, demand and our predictions for the future under the sections below.

Executive Summary Overview of the serviced apartment marketSupply History and overview of the apartment market.

Geographical organizationExisting serviced apartment with breakdown in Grades, rent and occupancy rateRegional comparisonResident analysis

Demand Demand analysis:Expanding expatriate populationGrowing economyDemand from short-term stay

Future Outlook Forecast on future supply and performance in terms of rents and occupancy levelsAnalysis on future expansion and potentialNotes on new projects

Investors Insight SWOT analysisAppendix Existing supply - Possible future supply - Residential glossaryLocation map Location map of existing and future serviced apartment buildings

Other reports from Savills

Property market reports for the following locations:

Da Nang

Hai PhongNha TrangDa LatLong AnQuy NhonCan ThoVung TauPhan ThietPhu QuocBinh DuongDong NaiPhnom Penh (Cambodia)

Savills Vietnam’s research team also conducts research on client-requested scopes of service; we are available to discuss solutions to your market intelligence needs with you.

Reports on specific topics in Vietnam:

General Introduction to Vietnam

Legal Issues and Bank FinanceIndustrial Zone MarketGolf Course MarketHoliday Home MarketLand Issues in VietnamPublic Facilities MarketResort MarketConstruction MarketNew Urban AreasInfrastructurePort Systems

q4 2008 sector briefs hn

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