JULY 2011 |HANOIKNOWLEDGE REPORT                                   ECONOMIC OVERVIEW                                      ...
JULY 2011 |HANOIKNOWLEDGE REPORT   INFRASTRUCTURE DEVELOPMENT OF HANOI   Infrastructure has always been a principal factor...
JULY 2011 |HANOIKNOWLEDGE REPORT   INFRASTRUCTURE DEVELOPMENT OF HANOI                                                    ...
KNOWLEDGE REPORT | Q2 2011 | GOLF COURSES | HANOIGolf coursesCurrently, there are 27 operating golf courses in Vietnam,man...
KNOWLEDGE REPORT | Q2 2011 | GOLF COURSES | HANOI   Typically, land use rights are limited to 50 years for      golf cour...
KNOWLEDGE REPORT | Q2 2011 | OFFICE | HANOIOffice                                                           Average rent a...
KNOWLEDGE REPORT | Q2 2011 | OFFICE | HANOIOUTLOOK                                                                        ...
KNOWLEDGE REPORT | Q2 2011 | RESIDENTIAL | HANOIResidentialOVERVIEW                                                       ...
KNOWLEDGE REPORT | Q2 2011 | RESIDENTIAL | HANOIDEMAND                                                            The resi...
KNOWLEDGE REPORT | Q2 2011 | RETAIL | HANOIRetail                                                                   The Ga...
KNOWLEDGE REPORT | Q2 2011 | RETAIL | HANOIFUTURE SUPPLY                                                    COLLIERS INTER...
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Hanoi Knowledge Report - July 2011


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Hanoi Knowledge Report - July 2011

  1. 1. JULY 2011 |HANOIKNOWLEDGE REPORT ECONOMIC OVERVIEW The Government’s primary focus on inflationary control policy has made the whole economy growth rate in- crease at a slower pace than previously. The first half of 2011 saw a GDP growth rate of 5.57%, which is lower than last year’s growth in the same period of 6.16%. In the first six months of 2011, new registered FDI was approximately US$4.69 billion (equaling 52% of that reg- istered in the first half of 2010) and disbursed capital totaled US$5.3 billion (98% of that recorded for the first six months of 2010). Processing and manufacturing in- dustry, construction, accommodation and F&B services rank highest among the FDI sectors while the real estate sector ranks fifth. Inflation remains a hot issue despite the fact that Q1 saw great efforts in controlling inflation from the Government. M-o-M CPI changes were 3.32%, 2.21% and 1.09% for April, May and June, respectively. Although the Govern- ment kept the expected inflation rate for 2011 at 15%, specialists from the Ministry of Planning and Investment declared the rate would stand at 17-18% in the best sce- nario. The quarter’s statistic for international trade deficit was approximately US$3.637 billion, much higher than last quarter’s deficit of US$3.02 billion although the deficit level in June itself was the lowest since September 2010. Total retail and services sales for the whole quarter were approximately VND459,900 billion, posting a slight in- crease against Q1/2011. The number of international arrivals was recorded at 1.454 million people, showing a minor q-o-q decrease of about 4%. www.colliers.com/vietnam Pg 1
  2. 2. JULY 2011 |HANOIKNOWLEDGE REPORT INFRASTRUCTURE DEVELOPMENT OF HANOI Infrastructure has always been a principal factor influencing real estate value. Also, its development directly supports that of the economy. In recent years, Hanoi has invested extensively in expanding and improving its transportation network to sup- port economic growth and population growth. Most upgrading works will be included in the Hanoi’s Urban Development Plan until 2030, including the long-term vision up to 2050 that is currently up for examination. Major infrastructure works planned for development in Hanoi involve the following: Development planning of the railway system in Hanoi RAILWAY In addition to the present system, Hanoi identi- fies 4 new lines: Number 1: an aerial railway line connecting Ngoc Hoi and Yen Vien through the city’s center, 38.7km long, serving the North-East and South outskirts of Hanoi. Number 2: Noi Bai – City Centre – Thuong Dinh, 33.7km, this will be the trunk line connecting im- portant destinations in the inner city such as Dong Anh New Urban Area, the new administra- tive complex in Tu Liem, the Old Quarter, Na- tional Highway 6 and Thuong Dinh. Number 3: Nhon – Hanoi Station – Hoang Mai, 21km, connecting the West, South and City Cen- tre, involving both aerial and underground metro. Number 4: Hanoi – Ha Dong, 14km, urban rail- way with stops at Cat Linh - Hao Nam - La Thanh - Thai Ha - Lang - Nga Tu So - NH 6 - Thuong Đinh - Ha Đong - Ba La. Number 5: South Ho Tay – Ngoc Khanh – Lang – Hoa Lac. The 34.5-km route is planned to con- nect the CBD and the urban areas along the Lang – Hoa Lac axis. Source: General planning for the construction of the capital until 2030 www.colliers.com/vietnam Pg 2
  3. 3. JULY 2011 |HANOIKNOWLEDGE REPORT INFRASTRUCTURE DEVELOPMENT OF HANOI OVERHEAD ROADS In 2010, the transportation department of Ha- Bridges over the Red River in Hanoi noi proposed the construction of six overhead roads between 2010 and 2015. These projects are expected to cost more than VND 32trn (US$1.65bn). The overhead roads would cover: Lac Long Quan - Yen Phu road; Nga Tu So - Nga Tu Vong - Minh Khai - Vinh Tuy bridge road; Noi Bai - Mai Dich - Phap Van; Hanoi Railway Station - Xa Dan - Pham Ngoc Thach - Ton That Tung - Kim Giang road 70; Tran Duy Hung - Lieu Giai - West Lake; and, Giang Vo - Lang Ha - Thanh Xuan. BRIDGES From now until 2015, Hanoi will complete Dong Tru, Nhat Tan, Phu Đong 2, Vinh Thinh, Vinh Tuy (stage 2) bridges and prepare to build Thuong Cat, Tu Lien, Hong Ha, Me So bridges over the Red River as well as other bridges over Nhue, Day and Duong rivers. 35 bridges in the rural districts will also be im- proved. ROADS Urban roads Le Van Luong Extended: This 5 km road run- ning from Van Phuc to Yen Nghia Ward in Ha Dong District was completed in September 2010. The 40 m wide road supports a speed limit of 80 km/h. This road links the urban cen- tre of Hanoi to Ha Dong District and reduces traffic congestion on Nguyen Trai. Nhat Tan – Noi Bai Road: This 12.1 km road has six lanes and width ranging 80-100 m. This route starts from Vinh Ngoc intersection and ends at Minh Phu (Soc Son). According to Source: General planning for the construction of the capital until 2030 the schedule, construction will begin in Q2/2011 and complete before year-end of 2013. www.colliers.com/vietnam Pg 3
  4. 4. JULY 2011 |HANOIKNOWLEDGE REPORT INFRASTRUCTURE DEVELOPMENT OF HANOI Road network to and from Hanoi Hanoi – Hung Yen Dyke Road: This road is 10 km and runs from Chuong Duong Bridge to the Hanoi – Hung Yen border. After the completion at year-end 2010, it has not only connected the CBD to Long Bien and Gia Lam Districts, but also increased the traffic flow between Hanoi and Hung Yen. The Ring Roads Ring Road No.1 This 23 km Ring Road runs through Nguyen Khoai – Tran Khat Chan – Dai Co Viet; Kim Lien – O Cho Dua – Hoang Cau; and Voi Phuc – Cau Giay. Part of this road from O Dong Mac to Nguyen Khoai Dyke section has not cleared ground. Ring Road No.2 With a length of 43 km, this road connects the entire CBD (including Hoan Kiem, Hai Ba Trung, Ba Dinh, Cau Giay and Tay Ho Districts). Some sections are still in land compensation stage. Estimated total project cost of this section is about US$98 million (VND1.8 trillion). Ring Road No.2.5 is situated between Ring Road No.2 and Ring Road No.3. With a total length of about 21 km starting from the Ciputra Urban Area and end- ing at Ring Road No.3. The first phase, from Tran Thai Tong to Trung Kinh Street, was projected to con- struct within two years time, from 2010 to the end of 2011. Ring Road No.3 With a total length of approximately 65 km, Ring Road No.3 connects industrial parks and urban areas from Bac Thang Long – Noi Bai through My Dinh – Me Tri Ha – Nam Trung Yen to Linh Dam and Dinh Cong. It will allow more traffic to circumvent the crowded city centre. Ring Road No.3 includes sev- Source: General planning for the construction of the capital until 2030 eral existing roads. Phase 1 was completed in Febru- ary 2010, and Phase 2 from Thanh Xuan junction to Hanoi, including: Phuc Yen, Me Linh (Vinh Phuc); Dan Phuong, Linh Dam started in March 2011 and will be com- Hoai Duc, Thuong Tin, Ha Dong (old Ha Tay); Van Giang, Yen pleted in 2013. My, Van Lam, Nhu Quynh (Hung Yen); Tien Son, Tien Du, Yen Ring Road No.4 The 136-km, 6-lane Ring Road No.4 Phong Hiep Hoa (Bac Ninh), and Soc Son (Hanoi). It will also will link National Highways and centralized highways, cross the Red, Duong and Cau rivers. Industrial Parks, and Hanoi’s satellite urban areas. The project was divided into phases and work will begin soon to This highway measures 90 – 110m in width and will meet the goal of completing the project before 2020. pass through several districts and provinces around www.colliers.com/vietnam Pg 4
  5. 5. KNOWLEDGE REPORT | Q2 2011 | GOLF COURSES | HANOIGolf coursesCurrently, there are 27 operating golf courses in Vietnam,many of which are developing/upgrading their area andfacilities. These 27 golf courses are located in 17 provincesthroughout Vietnam, of which there are 12 in the North, 7 inthe Central region and 8 in the South. The country’s risingpopularity as a golf destination is becoming more and morevisible as the construction,design and services quality aregetting considerably better.In the North, 10/12 golf courses are located within theNorthern Key Economic Zone. Hanoi and Vinh Phuc eachhave three courses, Hai Phong has two and Hai Duong, Year Term: Popular year term for a membership ranges fromQuang Ninh each have one. The courses in Hoa Binh and 25 to 30 years, but some GC’s ―count‖ that term from the dateNinh Binh have 54 holes (The Royal Golf Club in Ninh of contract while others refer to the year of completion of theBinh will be completed with fully-functioning 54 holes in GC’s. More flexible short-term memberships of 1-5 years are2014 from 18 holes currently). Eight of the courses are lo- offered by some GC’s.cated near the mountains and take maximum advantage ofthe panoramic mountain views and water surface while the Number of Holes: A GC with 18 holes often offer two typesrest are placed near the coastline or big cities for the con- of membership, the 9-hole and the 18-hole. A similar methodvenience of golfers. Golf courses in the North are relatively could be applied by other GC’s with 27, 36 and 54 holes. Av-new, especially in comparison with those in the South, erage entry fee for an individual 18-hole membership is ap-since 9/12 courses started operation only in the last 5 years proximately US$50,000 (for year terms between 25 – 35(2006-2011). years, however, the range of fee is fairly wide, from US$20,000 to US$132,000). Entry fee for an individual 36-A number of factors and terms affect the fee structure hole membership is US$48,000 on average with a range be-(which consists mainly of membership, annual fee, green tween US$24,000 and US$86,000.and caddie fee) of a golf course in the North of Vietnam,such as: Course and Hole Design: View, terrains (including finely-Location: which explains why the fee structures of the designed sand dunes, water or lake, highland ridges and oth-strategically positioned Van Tri GC and Hanoi GC’s are a ers) and holes difficulty play a very important role in attractingfew times higher than others for similar terms and number golfers. Also, having an international golf course design teamof holes. or an endorsement from a prominent golfer associated with a development can enhance greatly the course’s image.Golf courses in the North of Vietnam Membership Type: Individual, Family and Corporate mem- bership, of which Corporate type is sub-categorized into dif- ferent options (with fixed and/or floating nominees). Members’ guests and visitors may play but have to pay hefty charges (including green fee, caddie and golf cart fees) while mem- bers are free from green fee and get discounts on using ser- vices and facilities. Golf course developments in Vietnam, however, are in the early phase; and a few points can be made here:  Golf is a luxury sport in Vietnam given a low level of disposable income. Most golfers are wealthy and influ- ential businessmen and politicians, thus playing golf is also considered a good chance to network.Source: Research and Valuation, Colliers International Hanoiwww.colliers.com/vietnam Pg 5
  6. 6. KNOWLEDGE REPORT | Q2 2011 | GOLF COURSES | HANOI  Typically, land use rights are limited to 50 years for golf course projects which can limit the liquidity of the investment and hence the availability of capital.  Membership fees and service charges, although high, do not yield much financial benefit to golf course de- velopers. Instead, they aim at undertaking high-end residential projects included in the golf site. Golf can be developed within a resort and constitute an add-on facility of it, or as an individual project. In either case, the developers build and offer holiday homes or villas NEW LEGAL ISSUES for sale, sometimes under a Timeshare contract. How- In an effort to curb inflation and keep the real estate bub- ever, this presents some risks to the developer, espe- ble in check, the government issued Decree 11/NQ-CP cially during the downturn of the real estate market dated 24/02/2011, Instruction 01/CT-NHNN dated when high-end housing becomes most vulnerable. 01/03/2011 and Official Dispatch 2956/NHNN-CSTT Moreover, if a golf course complex does not incorpo- dated 14/04/2011 putting a cap on non-productive credit rate full facilities and add-on infrastructure, it may line of the commercial banks at 22% of the total by end have difficulties in attracting potential high-income of June 2011, and at 16% by year end. Bank loan has always been the main funding source for real estate de- buyers. velopers and main category within the non-productive credit line of banks in Vietnam. However, due to thisFUTURE SUPPLY credit type’s popularity and lucrativeness, Vietnamese banks find it hard to comply with the SBV’s instruction.As per the Decision 1946/QD-TTg of the Prime Minister Statistics from the State Bank of Vietnam showed that atdated 26/11/2009, Vietnam will have 89 golf courses by the current date, 20 banks are still struggling to cut out-2020, of which 27 are currently operational and expanding. standing non-productive loans, mostly to real estate de-27 courses in the North would take up 3,365 hectares of velopers, down to 22%. At the end of the year 2010, localland, while the Central and the South will have 37 and 25 banks had lent a total VND228 trillion (over US$11 bil-projects respectively, requiring 3,782 and 2,837 hectares of lion) to the real estate sector, up 23.5% from a year ear- lier. The SBV responded to this situation saying they willland. The average area of each golf course is 112.2 hec- not postpone the 30/06/2011 deadline.tares, and a large number of projects would have 18 holesand 36 holes. Most future golf course development plans will In reference to this, official statistics stated that in 2010,include detached villas for sale. Ho Chi Minh City’s trading floors closed 4,311 transac- tions with a total value of VND6,509 billion (over US$326Nevertheless, the Ministry of Investment and Planning re- million), and in Hanoi, 3,929 transactions were concluded with a total value of VND18,680 billion (over US$934ported a number of issues regarding the national planning million) – almost triple that of Ho Chi Minh City. Accord-for golf projects. Some of these problems involve projects ing to the Ministry of Construction (MOC), property pricesthat are suspended/cancelled, projects proposed by some varied differently across the localities and sectors. In Ha-provinces out of the scope of the above Decision and un- noi, land prices surged while apartment prices fluctuatedlicensed golf courses. A final solutions from the Prime Minis- moderately at high levels. HCMC market was much moreter is to be expected. stable with regards to prices and number of transactions. This discrepancy hints at the potential for growth of Ha- noi’s property market while HCMC’s market is maturing.www.colliers.com/vietnam Pg 6
  7. 7. KNOWLEDGE REPORT | Q2 2011 | OFFICE | HANOIOffice Average rent and occupancy rate of grade B officeGRADE AThere were no new Grade A buildings coming online inQ2/2011. However, the sector’s performance did show sig-nificant improvement with average occupancy rate up 7.74percentage point and average rentals up US$3.4 comparedto Q1 2011. This has been the largest increase after 6 con-secutive quarters, and it can be seen from the graph belowthat the market broke the 90% and $40 marks. Although themonths ahead are still laden with worrisome signs of contin-ued credit crunch and prudent financial policy, at least somelevel of confidence has been restored to the developers.Slowly but surely, buildings with vacancy are filling up withboth big and small new office tenants. Still, the developers Source: Research and Valuation, Colliers International, Hanoiare having to consolidate their marketing and sales strategyin order to compete efficiently. Tenants now have much PERFORMANCE BY DISTRICTmore bargaining power and choices, therefore some move-ments within the same grade or from one grade to another There still exists a significant difference between the innerare to be expected. districts of Hanoi (Hoan Kiem, Hai Ba Trung, Dong Da and Ba Dinh) and the new outlying districts (Cau Giay, Tu Liem,Average rent and occupancy rate of grade A office Long Bien and Thanh Xuan) with regards to building per- formance. The majority of office space in Hanoi – over 560,000 sqm – rests within the old Hanoi districts while the outlying districts are home to nearly half this amount – over 230,000 sqm. Hoan Kiem, with its superior location, has the largest total floor space and the highest occupancy rate at 94% for the highest rent at US$40/sqm/month. At the other end of the spectrum, Long Bien has the lowest amount of floor space for the lowest rent at US$15/sqm/month. In the Knowledge Report for Q1 2011, Colliers compared the performance of the ―new CBD‖ districts of Cau Giay and Tu Liem with that of the CBD districts of Hoan Kiem and Hai Ba Trung. The constrast shown there will stay for at least the foreseeable future. This year, Keangnam Landmark Tower and Indochina Plaza Hanoi will come on stream, adding a huge amount of space to the current stock while both are still actively seeking occupiers. Therefore, we can expect thatSource: Research and Valuation, Colliers International, Hanoi the performance indices of the market segment there will be negatively affected.GRADE B Average rent and occupancy by district, Q2 2011Surprisingly, what happened to Grade A and Grade B thisquarter was exactly the reverse of what had happened in Q12011. While Grade A posted improved results this quarter,Grade B showed worsened performance. Average occu-pancy rate and average rentals dropped from 87.9% to83.6% and from US$26.1/sqm/month to US$25.1, respec-tively. This further strengthened the downward trend that hasimmersed the market in stagnancy for almost two years now.Some buildings in the outer districts performed poorly, losingoccupancy within a significant amount of space. On the flipside, ―floor selling‖ has helped some others to boost occu-pancy rate remarkably. This has proven to be a powerful toolwhich developers can use to deal with worsened businessconditions. Source: Research and Valuation, Colliers International, Hanoiwww.colliers.com/vietnam Pg 7
  8. 8. KNOWLEDGE REPORT | Q2 2011 | OFFICE | HANOIOUTLOOK FOCUSIn 2011, 240,000sqm of Grade A and B office space will Property : Charmvit Towercome on line, equivalent to nearly half of the current stock. Developer: Charmvit GroupThe two high rise buildings Keangnam Hanoi LandmarkTower and EVN Building alone account for 45% of this new Location: 117 Tran Duy Hung, Cau Giay Dist.supply. For the period 2011-2014 and onward, a huge Grade: Aamount of stock is in the pipeline and poised to increaseoverall total floor area threefold to reach nearly GFA : 53,600 sqm3,000,000sqm after 2014. Grade B sector will face the mostcompetitive pressure, probably because property develop- NFA : 45,000 sqmers, drawing from their recent experience, expect that the Completion Date: August 2010buildings with moderate rent prices and quality will standmore chance to perform well despite the risks of inflation Rent: $27-30 /sqm/monthand economic stagnancy. Grade A sector will face competi- (incl.S/C & excl.VAT)tion from both within itself and from Grade B. Overall, marketsupply will expand at a faster pace than the GDP of Hanoi,hinting at downward pressure on rent rates and occupancy.Currently, the majority of enquiries come from tenants whorequire office space of less than 250sqm. However, a num-ber of large space tenants sought to capitalize on lowerprice offers in same or lower grade buildings and new largespace users have come to Hanoi, especially from the bank-ing, IT, insurance and education industries. These occupiersand investors are actively looking for premises and there-fore, building developers can expect to see more enquiriesfor space over 500sqm.In recent years, the market has seen a number of large-scale projects come on line with a vast amount of floor areasuch as MIPEC Towers, Keangnam Hanoi Landmark Tower,EVN Building, BIDV Tower and Charmvit Tower. In order tosecure occupants and ease pressure from banks and finan- Property : TTC Buildingciers to secure a rent roll, some landlords have chosen to―floor sell‖, or virtually to lease, on a long-term basis, an en- Developer: Trading & Technology Company - TTCtire floor or several floors to a secondary lessor who sub- Location: Duy Tan Str., Cau Giay Dist.leases the floors to individual tenants. Colliers anticipatesthat this trend will strengthen in the near future, especially Grade: Bfor those buildings with a significant amount of floor space. GFA : 13,360 sqmEstimated future supply of office space in Hanoi Completion Date: Q1-2011 Rent: $21-23 /sqm/month (incl.S/C & excl. VAT)Source: Research and Valuation, Colliers International, Hanoiwww.colliers.com/vietnam Pg 8
  9. 9. KNOWLEDGE REPORT | Q2 2011 | RESIDENTIAL | HANOIResidentialOVERVIEW Units launched in Q2 2011 by gradeThe Residential market enters Q2/2011 with many changesversus the last quarter. The market reports strong increasein the average price at the end of March and in April 2011.Land prices in some locations in the West, especially theprojects along National Highway 32 which is slated to com-plete soon, have increased significantly by 20% - 30% com-pared to Q1/2011. The price level was between 35 - 45 mil-lion VND/sqm, equivalent to US$1,700/sqm to US$2,200/sqm. However, in May and June the market cooled down.Average price dropped by 3 million to 5 million VND/sqmcompared to the beginning of Q2. The apartment for salesector showed a similar scenario, whereby prices raised inApril and then dropped at the end of Q2.PROJECTS LAUNCHED IN Q2 2011 Source: Research and Valuation, Colliers International, HanoiIn Q2/2011, several high end apartment projects launched,mainly in Hai Ba Trung district which accounts for 54% oftotal units launched. Cau Giay district comes in the second SUPPLYplace with 17% of the total new supply. Worthy of note arethe Times City project at 458 Minh Khai street by Vincom New supply from 2011 to 2014 will amass mainly in theGroup, estimated to be completed in 2014 with approxi- West of Hanoi which is poised to become the ―new CBD‖ ofmately 8,000 units; the Mandarin Garden with 1,000 high the city. Approximately 28% of total new supply will be in Haend apartments at Lot N03 - South Tran Duy Hung new ur- Dong district, 15% in Tu Liem, 15% in Cau Giay, 10% in Haiban area and 90 high-end units at the Eurowindow Multi- Ba Trung, 6% in Long Bien, 6% in Thanh Xuan, 8% in Taycomplex project on Tran Duy Hung street are launched in Ho, 6% in Dong Da, 5% in Hoang Mai and 1% in Ba DinhJune. District.Units launched in Q2 2011 by district It is estimated that over 11,000 new apartments are in the pipeline in 2011. Despite the fact that high prices deter a lot of potential buyers, the majority of new supply is in the mid- and high-end segments. New supply from 2011 to 2014 by districtNote: No new units in the other districtsSource: Research and Valuation, Colliers International, HanoiIn the second quarter of 2011, the high-end apartments seg-ment takes up a big chunk of the new supply, accounting for71% of the total with 4,500 units. The mid-end segmentcomes second at 21% of the total with 1,300 units. Just 8%(500 units) comes from the low-end projects. Source: Research and Valuation, Colliers International, Hanoiwww.colliers.com/vietnam Pg 9
  10. 10. KNOWLEDGE REPORT | Q2 2011 | RESIDENTIAL | HANOIDEMAND The residential market is still waiting for positive points from the financial market and credit policies of banks, howeverRecently, most buyers (estimated 60-70%) in Vietnam are this will not occur in the latter part of 2011 and will beinvestors. However, in recent years, the number of end us- unlikely in 2012.ers was rising, with many young couples seeking to moveinto a new home and provincial residents wanting to relocateto the city. FOCUSThe State Bank has tightened its credit policy to control thecashflows into stock and real estate market, i.e non- Property : Times Cityproductive areas. Those buyers who rely on bank loans to Developer: The Vincom Grouppurchase property now face greater difficulty and as a result,demand has shrunk further compared to the last quarter. Location: Minh Khai St., Hai Ba Trung dist. Total units: Approx. 8,000; Mid-high endMARKET PRICES 25 blocks of 27 – 35 storiesMarket prices by segment Launching time: April 2011 Current market price: US$1,400 - US$1,800/sqmSource: Research and Valuation, Colliers International, HanoiThe generally consistent trend of steady growth of apartmentprices that has continued for over a year prior to Q2/2011has now come to an end. From the graph above, the upward Property : The Mandarin Gardenline across all sectors has reversed. This notwithstanding, Developer: Hoa Phat Groupthe degree of reduction is minor, from 1% to 2% for all seg- Location: Me Tri St., Tu Liem dist.ments. Total units: 1,008; High-endThe strict credit policies enforced by the SBV and the crisis Launching time: June 2011of the stock market have made the real estate market capital Current market price: US$2,100 - US$2,300/sqm-thirsty and many mortgaged properties have been offeredfor sale. Those factors reflect badly on the residential marketprice trend.OUTLOOKThe residential market instability in Q2/2011 underlines thestrong impact of the financial market on the real estate. De-velopers have now started to, really by necessity, pay moreattention to the interests of the buyers. More promotionalpolicies began to be used and unfavourable terms for buyersare being reviewed. For instance, the Usilk City Project de-veloper is willing to give away free retail space from 20 to 40sqm if the apartment buyers make a one-time payment up-front. The Times City project developer eliminated the peg-ging of price rates to the CPI.www.colliers.com/vietnam Pg 10
  11. 11. KNOWLEDGE REPORT | Q2 2011 | RETAIL | HANOIRetail The Garden, previously considered as a department storeAccording to the latest AT Kearney’s 2011 Global Retail De- by Colliers, is now reclassified as a shopping center since itvelopment Index, there is an enormous change in Vietnam’s lacks central management and the cashier format normallyranking over the last years: The country’s ranking plum- seen in department stores. Accordingly, total supply formeted from the first position in 2008 to the 23rd position in2011. The report pinpointed slow infrastructure and distribu- modern retail spaces increased by 10.33% against Q1/2011tion network development as two main reasons to hamper while shopping centers now account for 42% of the total re-foreign investment in this area. However, a good thing is that tail area.over the last 10 years, Vietnam has been 1 of the 5 coun-tries ―consistently ranked in the top 10‖, according to the RENTSsame company’s report ―GRDI: A 10-year restrospective‖.As such, Vietnam surpassed other developing markets interms of retail spending per capita (12% CAGR 2001 –2010) and retail space. Therefore, big international retailinvestors are still eying Vietnam as their next potential desti-nation.In the first half of 2011: Vietnam’s total retail revenue wasVND914,000 billion (equiv. to US$44.58 billion), posting a y-o-y increase of 22.8% which follows the consistent growth In Q2/2011, the slight increase of 0.92% in the average rentpath during the years 2005-2009. of non-CBD retail centers could be explained by the appear- ance of Pico Mall, which has a prime location for retail inOVERVIEW OF HANOI RETAIL LEASING MARKET Dong Da District and is asking relatively high rents. The re-The Hanoi retail market has been gaining momentum in re- tail centers in the West are offering slight discounts and fa-cent years despite the economic slowdown. Traditional vourable terms. Meanwhile, the temporary closure of Trangstreet vendors and shop houses now face new competitors Tien Plaza, a long standing and well-known shopping centerin Hanoi such as large modern supermarkets, convenience in the CBD still puts the pressure on rental rates, resulting instores, high-end shopping centres and department stores. a 2.6% increase in this submarket.However, shop houses still comprise a major share of thecurrent retail market in the city. OCCUPANCYRetail Podiums are typically gathered in the CBD while By location, retail in inner districts (including Hoan Kiem, HaiShopping Centers and Department Stores are scattered all Ba Trung, Dong Da and Ba Dinh) continued its strong per-around the city. However, CBD retail centers enjoy strong formance by remaining at full average occupancy whereasoccupancy and rents, while new comers in the West still outer areas posted an average vacancy rate of 87%.struggle in filling up the vacant spaces. By retail format, retail lobbies showed impressive perform-NEW SUPPLY ance as 100% of the total area is occupied. Regarding de- partment stores, Parkson and Grand Plaza have witnessedPico Mall – retail component within the Mipec Complex opposite situations where Parkson’s vacancy rate has stoodbuilding (which will include an office and two apartment tow- at 0% since its opening in Q3/2008 and Grand Plaza’s va-ers) officially started operation on April 2 nd. Located on Tay cancy has been very high. Possible reasons could be inap-Son Street and designed by Finenco and PTW, Pico Mall propriate floorplan and disagreement between the developerfeatures over 30,000 sqm of retail area and expects to servenot only residents of the two apartment towers but also Ha- and tenants at the beginning of this year. This could be ex-noi inhabitants in the greater neighborhood. plained by the plan of Grand Plaza to close the whole de- partment store for renovation, which is expected to startAs at end of June, Pico Mall has filled up 88% of the space from August. Shopping centers also had a successful quar-with various tenants coming from different retail brands in- ter with the average occupancy of 95%. The newest entrant,cluding Citimart, Pico Electronics, Pico Decor, Megastar and Pico Mall has filled up approximately 88% of its huge retailother international brands. area with a strong tenant base; a number of leased lots areAlthough located 100 m from Parkson – a well-known de- fitting out and would come online soon. However, thepartment store, Pico Mall has done well in attracting tenants amount of visitors to Pico Mall is not satisfying the developerand visitors. These two developments will create an interest- and is expected to increase when the entire complex (or ating retail center. least the office tower) is completed, and Megastar Cineplex starts operation.www.colliers.com/vietnam Pg 11
  12. 12. KNOWLEDGE REPORT | Q2 2011 | RETAIL | HANOIFUTURE SUPPLY COLLIERS INTERNATIONAL VIETNAMThe second half of 2011 is expected to witness exciting retail A TOTAL SOLUTION PROVIDERevents with a boom of supply for modern retail spaces com-ing on stream. All of the three upcoming retail centers are Advisory Serviceslocated in outskirt districts of Hanoi, one in Tu Liem, two in Valuation & AppraisalLong Bien: Development Consultancy Project Consultancy Research Feasibility Study Management Services Tenancy Management Tenant Representation Transaction ServicesHuge supply will also come on stream in the short-term fu- Landlord Representationture. As at year end of 2013, the forecast total market supply Investment Advisoryfor modern retail area would be approximately 1,600,000 Acquisitions & Disposalssqm, which is more than five times the current supply. Some Residential Sales & Leasingmega-projects are Me Linh Plaza Ha Dong (2012, GFA of55,000 sqm), Ciputra Hanoi Mall (2012, GFA of 130,000 CORPORATE REAL ESTATE SERVICESsqm), U-Silk City (2013, GFA of 70,000 sqm), Royal City(2013, GFA of 200,000 sqm) and Times City (2013, GFA of NEW OFFICE230,000 sqm). 10th floor, Capital Tower Building 109 Tran Hung Dao street, Hoan Kiem district Hanoi, Vietnam Tel: 04 3941 3277 Fax: 04 3941 3278 The second office is still at 39A Ngo Quyen street, Hanoi Tel: 04 2220 5888 Fax: 04 2220 1133 Email: info@colliers-hanoi.com Website: www.colliers.com/vietnam www.colliers-hanoi.com Contact details Ms Anna Lomas Market Research and Valuation—Manager Anna.Lomas@colliers-hanoi.com Mobile: +84 914 962 505 Mr Nguyen Tien Quoc Market Research and Valuation—Senior Researcher Quoc.Nguyen@colliers-hanoi.com Mobile: +84 983 344 579www.colliers.com/vietnam Pg 12