HCMC Market Insights Q1 2016 (EN)

PERFORMANCE
Rental growth across all grades was recorded in the review quarter.
Grade A’s average net asking rents increased 1.92% q-o-q, staying at
USD40.5/sqm/month while those of Grade B surged 5.1% q-o-q, reaching
USD22.07/sqm/month.
Average occupancy rate witnessed downward trend over the quarter but
maintained at a high rate of 93.4%. Grade A and Grade B’s occupied rate
were 92% and 94.8%, down 3.1% and 1.86% q-o-q respectively.
SUPPLY
No new office building entered the market in the first quarter of 2016. The
supply pipeline remained stable with 11 Grade A and 57 Grade B office
buildings, providing approximately 1,331,347 sqm GFA.
Grade B will domininate new supply in the next quarters with nearly
77,000sqm NLA from 4 projects. Despite having no additional buildings
this year, Grade A stock will grow substantially in the next two years. By
the end of 2018, the market is expected to welcome 4 more Grade A office
buildings which are Deutsches Haus, Saigon Centre (Phase 2), Saigon One
Tower and The One, providing nearly 172,859sqm NLA.
DEMAND
As a result of stronger FDI inflow to the city, the growing number of foreign
enterprises will continue to drive office demand. This type of tenants
would have distinctive enquiries such as green buildings with good access
to natural light and energy efficiency, contiguous floor plates of larger than
1,000 sqm, prime locations with accessibility to public transport and staff
amenity or close proximity to clients and brand profile. Landlords should
be strategic to statisfy sophisticated leasing requirements from clients.
OFFICE SECTOR
Q1 2016 | MARKET INSIGHTS
HO CHI MINH CITY
DAVID JACKSON
General Director
david.jackson@colliers.com
PLEASE CONTACT US FOR ANY INFORMATION
Table 1: Future supply
ECONOMY OVERVIEW
The combination of slowdown in manufacturing and decrease of
profitability in agricultural sector in Q1-2016 due to weather difficulties
may have caused a slow growth rate of GDP. Vietnam’s GDP grew 5.46%
in Q1-2016, significantly lower than 6.12% in Q1-2015. The Consumer
Price Index (CPI) increased to 0.57% m-o-m in March which resulted in
a 1.25% increment in the first three months of the year.
Export achieved USD37.9 billion, up 4.1% y-o-y while import values
were USD37.1 billion, down 4.8% y-o-y. FDI of newly registered and
supplementary capital was USD4.02 billion which was less than the
amount of USD5.607 billion in Q4 2015 but rose 119% y-o-y. The
disbursement value reached USD3.5 billion, a growth of 14.8% y-o-y.
Credit growth achieved 1.54% which was higher than the growth rate
of 1.25% same period last year. As manufacturing sector showed a
slowdown, the increase in credit growth is contributed by real estate
sector.
If Vietnam aims to set the GDP growth target for this year to at least
match the 2015 growth rate, the nation will have to make great efforts in
the next coming quarters.
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©2016 Colliers International Research
Figure 2: Average occupancy rate
OUTLOOK
As there is a current drought of premium office stock, landlords
are gaining confidence in offering higher rents and pushing back
incentives. High quality assets are expected to achieve a rent growth
up to 10%.
With prime locations and in close proximity of traffic hubs, CBD
office buildings continue to be highly sought-after. Decentralised
districts with well-established infrastructure and traffic system such
as District 7 and Thu Thiem new urban area will become alternative
options for tenants looking for large contiguous floor plates.
Source: Colliers International Research
Figure 1: Net absorption
HA VO
Research Manager
ha.vo@colliers.com
-10,000 0 10,000 20,000 30,000 40,000
Q1
Q3
Q1
Q3
Q1
Q3
Q1
201320142015
20
16
sq m
Grade B Grade A
Project name Grade NLA sqm
Expected
Completion
Hai Quan Tower A 30,000 2016
SGGP Building B 16,940 2016
HQC Royal Tower B 22,500 2016
Deutsches Haus A 24,900 2017
Saigon Center Phase 2 A 40,000 2017
Mapletree Business Center B 30,000 2017
E-Town Central B 35,000 2017
0
10
20
30
40
50
60
70
80
90
100
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2011 2012 2013 2014 2015 2016
Grade A Grade B%

PERFORMANCE
Lower rental rate in suburban areas resulted in a drop of 2% q-o-q
and 10% y-o-y in the average net asking rent across all segments.
Department stores and retail podiums maintained their rents while
shopping centers was down 3% q-o-q in rents, averaging at USD44/
sqm/month.
Average occupancy rate decreased 1.5% q-o-q, staying at 91.6% as
some newly-opened retail projects have not fill up their vacant space.
SUPPLY
The retail stock increased 65,400sqm NLA with the opening of two new
shopping centers in suburban districts.
Vingroup has made all efforts to expand their retail network in every
district in Ho Chi Minh City. While Vincom Le Van Viet marks Vingroup’s
first presence in District 9, Vincom Plaza Go Vap is their second retail
project in the highly-populated Go Vap District. To date, they have owned
6 retail properties across the city, providing more than 200,000sqm
NLA.
DEMAND
Food and beverage (F&B) tenants is expected to be the main driver that
will support the performance of HCMC’s retail market in the short to
medium term.
McDonald, Starbucks, Subway, KFC and Burger King are a few
international names that are growing their empires in the local market.
These retailers tend to sercure prime locations in a retail center to easily
catch the eyes of customers and lower the chance of their competitors.
RETAIL SECTOR
HO CHI MINH CITY
Figure 3: Total Supply
DAVID JACKSON
General Director
Figure 2: Asking Rent
OUTLOOK
The supply pipeline of shopping malls will grow bigger when Saigon
Center Phase II and Aeon Mall Binh Tan will come online in the
next quarters of 2016. The two new shopping centers will bring
more foreign brands to the local market, creating intense competition
between Vietnam and international retailers. Given abundant new
supply, low quality retail properties need to be repositioning to avoid
downtrend in rents and occupancy rates.
Figure 1: Market Performance
HA VO
Research Manager
ha.vo@colliers.com
ECONOMY OVERVIEW
sector.
0
10
20
30
40
50
60
70
80
90
100
90%
92%
94%
96%
98%
100%
Podium Department store Shopping centre
USD/sqm/month
Average asking rent Average occupancy
13 21 14
0
50
100
150
200
250
300
350
Retail Podium Department Store Shopping Centre
USD/sqm/month
Min average asking rent Max average asking rent
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
2010 2011 2012 2013 2014 2015 2016YTD
NLA(sqm)

PERFORMANCE
In the first quarter of 2016, more than 9,000 units were sold across
all segments, up 3.43% y-o-y. It is forecasted that throught out 2016,
approximately 57,500 units will be available for sale.
High-end and mid-end segments account for more than 70% of the market
share. Sale rate of mid-end segment grew 16% y-o-y while affordable
segment declined 18.9% y-o-y. In the coming quarters, the market share of
high-end segment will see more challenge from mid-end segment.
SUPPLY
In Q1-2016, it is estimated that 6,700 new units were launched for sale.
Eastern and Southern areas account for majority of new units supplied.
Condominium market is expected to continually increase both in quantity
and quality. Developers nowadays have to take part in intense competitions
for potential buyers. Apart from prime location, high-end developers
have come up with unique amenities and concept such as cruise habour,
waterfall infinity pool, artificial sea or hanging gardens, while mid-end
and affordable segments have competitively provided offers such as low
construction density as well as associated public services such as internal
parks, schools and sport centers.
DEMAND
Across all segments, buyers tend to be more selective in spending their
money. Branding of a developer and its ability in assuring a project’s quality
and progress are key factors considered by potential buyers.
Units with 1 or 2 bedrooms and price less than USD1,000/sqm are in
excessive demand from end-users. Demand for affordable segment seems
very high and is predicted to be grown steadily in the future.
CONDOMINIUM SECTOR
HO CHI MINH CITY
ECONOMY OVERVIEW
in Q1-2016, significantly lower than 6.12% in Q1-2015. The Consumer Price
Index (CPI) increased to 0.57% m-o-m in March which resulted in a 1.25%
increment in the first three months of the year.
supplementary capital was USD4.02 billion which was less than the amount
of USD5.607 billion in Q4 2015 but rose 119% y-o-y. The disbursement
value reached USD3.5 billion, a growth of 14.8% y-o-y.
Credit growth achieved 1.54% which was higher than the growth rate of
1.25% same period last year. As manufacturing sector showed a slowdown,
the increase in credit growth is contributed by real estate sector.
If Vietnam aims to set the GDP growth target for this year to at least match
the 2015 growth rate, the nation will have to make great efforts in the next
coming quarters.
DAVID JACKSON
General Director
OUTLOOK
Improved infrastructure provides better connection between
areas of the city as well as shorten the distance to the CBD.
This helps to increase the demand and the price of projects
in outer city areas. In addition, the new Law on Housing
which permits foreigners to purchase up to 30% of the total
number of apartments in a residential apartment project
expects to boost sales further.
Nevertheless, condominium has one of the highest
proportions of speculation among different segments of
real estate market. It is therefore vulnerable to government
policies and credit growth.
HA VO
Research Manager
ha.vo@colliers.com
Figure 3: Q-o-Q and Y-o-Y Changes In Asking Price
Figure 2: Average Asking Price by Segment
Figure 1: Sold Units
0
5000
10000
15000
20000
25000
30000
35000
40000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1
2016
units
0
1,000
2,000
3,000
4,000
5,000
Luxury High-end Mid-end Affordable
US$/sqm
Average primary price Average secondary price
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Primary market Secondary market
q-o-q changes y-o-y changes

PERFORMANCE
The villa and townhouse segment performed well in Q1 2016 thanks to
a warming property market and stable macroeconomic factors. Prices
continued to go up an average 1- 2% q-o-q.
The transaction volume went down 24% q-o-q due to a shortage in
supply of affordable segment.
SUPPLY
Four notable projects offered 486 new villas and townhouses to the
market.
Future supply is expected to grow strongest in Eastern and Souther
areas of HCMC this year while the western area has high potential to
develop in the longer term.
DEMAND
Ho Chi Minh City is home of three million immigrants. The city also
welcomes 50,000 newly married couples every year. Certain proportions
of these people might want to settle in the city in their own house and
would become potential clients of villa and townhouse market. Hence,
the demand for the market is maintained high and stable over years.
For mid-end and high-end segments, buyers prefer projects with
well-developed infrastructure, good traffic system and transparent legal
status. Similar to condominium market, low-priced, small area houses in
suburban seem to have highest demand from the market.
OUTLOOK
Free trade agreements such as the TPP would bring about an inflow of
foreign investors, specialists, management teams to Ho Chi Minh City.
VILLA/TOWNHOUSE SECTOR
HO CHI MINH CITY
ECONOMY OVERVIEW
sector.
DAVID JACKSON
General Director
This, accompanied with the new Housing Law which permits
foreigners to purchase up 250 separate houses in a project
where the population is equivalent to a ward, would expect to
increase the demand for villas and townhouses.
Districts 2 and District 9 in the East, District 7 and Nha Be in the
South are forecasted to continue to dominate the market while
the Western area have high potential to grow in the future.
Figure 2: Supply by Year
Figure 3: Current Supply by District
Figure 1: Changes in Asking Price
HA VO
Research Manager
ha.vo@colliers.com
0
1000
2000
3000
4000
5000
6000
7000
8000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1
2016
Existing supply New supply
units
0
200
400
600
800
Dist. 9 Dist. 2 Go
Vap
Nha
Be
Dist. 7 Binh
Thanh
Thu
Duc
Dist.
12
Binh
Tan
Binh
Chanh
dwellings
No. of townhouses No. of villas
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Primary market Secondary market
q-o-q changes y-o-y changes

PERFORMANCE
Grade A’s average occupancy rate remained unchanged over the quarter,
reaching 86.4%. The average gross asking rent recorded a drop of
2.61ppts q-o-q, staying at USD29.9/sqm/month.
Grade B had the best performance in the review quarter. Average
occupancy rate increased to 88.2%, up 0.45ppts while rental rate saw an
improvement of 1.35ppts, averaging at USD22.4/sqm/month.
SUPPLY
The existing stock was stable with approximately 4,100 units from 80
projects. Due to well-establised public facilities and amenities, the CBD is
home of more than 40% of total serviced apartments.
New supply from now until end of 2017 will grow substantially with
approximately 1,459 units. It is notable that five out of seven significant
future projects is located in District 1 and District 3. To meet current
demand from single tenants, the proportion of one-bedroom and
two-bedroom units tend to be increased in newly launched developments.
DEMAND
Demand for serviced apartments in Ho Chi Minh City will be boosted
Serviced apartments in the CBD are typically preferred by professional
singles due to its close proximity to their workplace.
District 2 and District 7 are attractive for expatriate families as these
two locations can provide large size accommodation together with social
amenities such as international schools, hospitals, shopping malls, etc. It
is observed that District 2 with peaceful riverside environment is popular
for Westerners while District 7 is a hot spot for Asian community.
SERVICED APARTMENT SECTOR
HO CHI MINH CITY
ECONOMY OVERVIEW
sector.
Figure 2: Total Current Supply
Table 1: Significant future projects under construction
DAVID JACKSON
General Director
HA VO
Research Manager
ha.vo@colliers.com
OUTLOOK
Demand for serviced apartments will be strengthen in the long
term after Vietnam joined Trans Pacific Partnership and Asean
Economic Community, leading to the growing number of foreign
workforce. Despite solid demand, this market segment have to
compete with buy-to-let apartments and private houses where
offering competitive rents for long-term stays. To maintain healthy
occupancy rates, landlords need to adjust rents and consolidate
their services when new completions enter the market.
Figure 1: Average Asking Rent by Grade
15
20
25
30
35
2010 2011 2012 2013 2014 2015 Q1 2016
US$/sqm/month
Grade A Grade B
0
1,000
2,000
3,000
4,000
2010 2011 2012 2013 2014 2015 Q1 2016
units
Grade A Grade B
Project name District Grade
Total
units
Expected
Completion
Sila Urban Living 3 B 217 2Q 2016
Ascott Waterfront Saigon 1 A 222 3Q 2016
Saigon Plaza 1 B 119 4Q 2016
New Pearl 3 B 120 4Q 2016
Saigon South Place 7 A 480 2017
Saigon Center Phase 2 1 A 216 2017
Berkley Service Residence 2 B 85 2017

PERFORMANCE
In Q1 2016, the average rent of industrial parks (IPs) in HCM City was
USD122/sqm/term and the average land use right term was 35.7 years.
IPs in Cu Chi district have the lowest rents, averaging at USD50-USD60/
sqm/term. On the contrary, IPs in Tan Binh District and District 7 have
highest asking rents of , up to USD220-USD270/sqm/term. In general,
rents in HCMC are currently more than double compared to those in the
Southern Key Economic Region such as Binh Duong, Dong Nai, Long An,
Vung Tau.
The average occupancy rate was 68%, stable over the quarter. About
two-thirds of IPs enjoyed above 90% occupancy rates due to its convenient
location and efficient services. Common offers for ready-built factories
were USD2.5-USD4/sqm/month (exclusive of VAT and service charge)
with a minimum area from 1,000-5,000 sqm.
SUPPLY
In the first three months of 2016, there is no new supply of IPS.
The total areas of IPs in HCMC are over 3,900ha of which the leasable
areas are over 2,700ha. By 2020, the total supply of industrial zones is
estimated to rise to above 6,500 ha, up to 67% compared to the current
supply. However, there is an uncertainty on the construction progress of
some industrial parks.
DEMAND
Inflows of Foreign direct investment (FDI) to Export Processing Zones
(EPZs) and industrial parks (IPs) in Ho Chi Minh City plummeted 69.5%
year-on-year to USD116 million in the first three months of 2016.
As of the end of March 2016, domestic and foreign firms registered to
invest in 1,390 projects with accumulated capital of USD9.17 billion in HCM
City’ EZs and IPs of which foreign-owned-enterprises accounted for 554
projects and USD5.42 billion. Meanwhile, domestic companies pledged to
invest nearly USD80.4 million in EZs and IPs in the first quarter of 2016,
INDUSTRIAL SECTOR
HO CHI MINH CITY
ECONOMY OVERVIEW
sector.
Figure 1: Net Absorption
Table 1: Future Supply
DAVID JACKSON
General Director
HA VO
Research Manager
ha.vo@colliers.com
representing an 80% y-o-y increase. Companies from non- TPP
member nations such as China, Korea, India would relocate their
operations and factories to Vietnam in order to benefit from tax
incentives for their products. Foreign investors, especially from the
U.S and Japan, will also flow into Vietnam more heavily to take
advantage of Vietnam’s abundant labor force and a 90-million
consumers market. These factors positively contribute to the
demand for industrial real estates.
OUTLOOK
Rents and occupancy rates are likely to go up in the coming quarters
as the inflows of FDI and the expansion of production in preparation
for the TPP and other FTAs are expected to continue.
The number of industrial areas is still being expanded. However,
the majority of future projects are in the process of site clearance
and compensation and hence construction process is expected to
be prolonged. Le Minh Xuan 2, Le Minh Xuan 3, Vinh Loc 3, Hiep
Phuoc phase 2 are among those that are on track to be in operation
soon.
Figure 2: Supply by District
Industrial Park Name District
GFA
(ha)
Le Minh Xuan Industrial Park - phase 3 Binh Chanh 242
Tay Bac Cu Chi Industrial Park - phase 2 Cu Chi 173
Hiep Phuoc Industrial Park - phase 2 Nha Be 597
0
10
20
30
40
50
60
70
80
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012 2013 2014 2015 2016
ha
Dist. 9
22%
Cu Chi
23%
Binh Chanh
16%
Binh Tan
10%
Dist. 7
8%
Nha Be
8%
Others
13%

HCMC Market Insights Q1 2016 (EN)

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HCMC Market Insights Q1 2016 (EN)