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April 18, 2016

Vietnam started 2016 with GDP’s real growth rate at 5.46% y-o-y, which is lower than the 6.03% growth rate recorded in Q1/2015. Decrease in Vietnam’s GDP growth rate is due to the slowdown of some big economies such as Japan, China and EU, as well as the instability of the global finance/money markets, some of which are experiencing negative interest rates and suspended multiple times in the review quarter. In such conditions, Vietnam’s average CPI went up by 1.7% y-o-y, reflecting a less optimistic economic environment. This hike in CPI was also partly due to increasing price in consumers’ goods during Tet holidays. However, this effect has not affected the lending rates and interest rates, which are reported to stay flat since last quarter.

Global crude oil started to pick up in the last few days of March, reaching US$38/barrel – an increase of more than 25% compared to the level in February. Although the current crude oil’s price is much lower than its peak in 2014, this hike sent some positive news in the middle of Vietnam’s poor economic performance. Along with better crude oil’s price, Vietnam’s stock market received positive signal with VN-Index reached 561 in the last trading day of March. Such achievement assures that 2016 will be a comeback year for Vietnam’s stock market.


CBRE notices dynamic activities across most sectors in the Vietnam real estate market.. FDI into Vietnam reached more than USD4 billion, of which 6% went into real estate, equivalent to 11 newly licensed real projects with USD239.8 million. Major investment foreign investment deals in Q1 2016 were from the following sectors: Residential (TNR Holding bought TNR Tower in Hanoi with USD110 million, Keppel Land bought Empire City from Empire City Ltd. In HCMC), Hospitality (Hyatt and Thaigroup bought US$165 million hotel in Hanoi), and Industrial/Logistics (Herberton, Samsung increased capital in manufacturing plants in industrial parks). Looking forwards into later 2016, trend of M&A activities is expected to continue, market will welcome more new players who might drive the Vietam market to another new high.

Condominium for sale

The condominium market started 2016 with a strong increase of 38% y-o-y in new supply, totaling 7,708 units, mostly from the affordable and mid-end projects which account for 73% of total new supply. New launches continued to be in the East (48%) and the South (31%) of HCMC. Interestingly, the West became busy again and accounted for 11% of new supply. This partly reflects the recent trend of some notable developers’ strategy to move to the West for cheaper land price, greater availability of land banks and improved infrastructure. On a quarterly basis, although Q1 new launch saw a shy of 44% due to the prolonged Tet holidays, CBRE believes that the number of launches will come back to the usual level since as of the end of March 2016, many top-tier projects have done soft launches with the official launch date being fixed in April – May, out of which was the long-awaited Vinhomes Golden River converting from the old Ba Son Shipyard site. While other premium high-end or luxury projects including Madison, The Nassim, Empire City, stick to private previews for VIP clients, Vinhomes Golden River initiated a sales training session for its partnered agents on an industrial scale with a crowd of nearly 5,000 keen brokers. This luxury project promises to take the headlines of the year.

With such an encouraging market sentiment, developers were confident to push prices up to US$2,029 psm, an uptick of 5.2% y-o-y and 1.2% q-o-q, mostly contributed by projects located in the hot spots. CBRE expects that the price level will improve in the coming months, driven by the CBD luxury projects including Madison, Vinhomes Golden River and Saigon Me Linh Tower.

Sales momentum remained bullish. Q1 reported an estimated 9,090 sold units, up by 27%. High-end segment witnessed the largest sales volume (41%), followed closely by mid-end (39%). In addition to the massive Vinhomes Central Park, two other best sellers were 9 View and Dream Home Palace, both of which are developers of affordable project who managed to gather an ambitious crowd under the hot sun at their launch events. Mr. Marc Townsend, Managing Director of CBRE Vietnam, commented, “Firstly this confirms that affordable and mid-end properties remain dominant with VND1.5 billion as the sweet spot.

Secondly, this reminds us of the crowd in front of The Vista An Phu back in 2007. Many have challenged us whether there is a bubble in the residential market. The market has evolved to become more diverse and complex. The buyers have become more discerning. The developers have not yet forgotten the scars and pain during the stagnant period. The Government is monitoring the market closely and controlling the real estate credits by proposing amendments for Circular 36, as well as the new supply by announcing the approved projects eligible to sell. While we are so focused on the condominium sector in the two big cities, we amicably forget that the a thousand of second-home properties have been absorbed in Phu Quoc, Nha Trang and Da Nang. Guarantee yields and busy weekend sales events are seeping out billions of dollars to the beach, even ahead of the bubble discussion.”


Retail market

During Q1 2016, the retail market welcomed Vincom Le Van Viet; the very first shopping centre in Distrct 9.This building adds 43,000 sm of NLA to the total supply in HCMC. Vingroup’s expansion plan of Vincom shopping centres and Vinmart Supermarket chain has been witnessed nationwide in the past year. In 2015, after buying out Maximark and other retailers, Vingroup opened more shopping centres/supermarkets in the 2nd and 3rd tier cities, including but not limited: Phu Tho, Hai Phong, Ha Long in the North, Buon Me Thuot in the Central, and Dong Nai, Can Tho, An Giang in the South. F&B and mid-end fashion are still the main drivers for attracting customers to go to shopping malls, especially in the non-CBD areas.

Rental rate experienced a healthy increase in Q1 2016 across most segments. Department stores and shopping centres’ rates in the CBD hiked by 2-4%, and those of retail podiums increased by about 10% due to good performance of Bitexco Financial Tower. In non-CBD area, CBRE observes the same trend of which retail podium’s rents increased by about 5%, while shopping centre’s rate dropped slightly. Such minor decrease was the result of the newly open Vincom Le Van Viet, which offers lower rate than the average market. Vacancy rate of the retail market went up by 1.5% q-o-q. Big projects such as SC VivoCity and Pearl Plaza were still unable to fill up their leasable area as a result of high rental rate.

District 1 is still waiting for the comeback of Saigon Centre phase 2 and Union Square, which both promises to bring new brands into HCMC retail market. In the non-CBD area, Q2 2016 will be likely to welcome two shopping centres with new large NLA: Lotte Mart Go Vap and Aeon Mall Binh Tan. Looking forwards, rents in CBD area are expected to continue to climb up due to limited new supply. On the other hand, rentals in non-CBD are expected to stay stable since the new supplies will most likely offer the rate that is similar to that of average market.

In general, new projects that have been opened in the last several quarters do not have distinct trade mix and thus, does’not create a “differentiated” impression. As a result, food traffic, although very high in the first months, dropped quickly as customers find these new projects interchangeable. To generate customer influx to these projects, developers focus on F&B and other entertainment services. CBRE also witness the “sidewalk sprawl” trend of which shopping activities spread out to the sidewalks, especially in downtown such as Nguyen Hue walking street. Young people prefer this type of shopping because of the convenience and the “hip” ambiance. Rental rate for shops on and near Nguyen Hue streets are expected to rise further in near future.


Office market

Office market had quite a quiet time in Q1 2016 with no new Grade A and Grade B buildings recorded. By the end of 2016, Ha Do Buidling (Tan Binh District) and HQC Royal Tower (District 7) of Grade B will both come online. More better-quality buildings operated by 2017 will offer more choices to tenants in both the CBD and non-CBD areas.

Recorded rents were stable in Grade B. On the other hand, Grade A slighty reduced by 1% q-o-q. Two mature buildings reduced their rents to attract more tenants; owners tried to fill up the vacant space occupied by their major tenants who moved out earlier this quarter. New buildings such as Vincom Center, Vietcombank, Bitexco Financial Tower had great leasing record since Q4 2015 as they decided to mark up their rents in Q1 2016. Furthermore, the global oil price drop forced major tenants in the oil and gas industry to relocate to decentralised areas to stay afloat. As a result, vacancy rate of Grade A improved by 0.2 ppts q-o-q.

In this quarter, one tenant consolidated his offices to new buildings which offer large floor plate on continuous floorings. Grade A’s net absorption was recorded at 750 sm NLA, and Grade B for 3,184 sm NLA. For Grade B buildings, vacancy rate dropped slightly due to good pre-launching leasing activities at Pearl Plaza.

Based on CBRE’s enquiries, the most active sectors in the first quarter was Sourcing. Companies in this sector are looking for new space to occupy, and they often renew with longer lease term. 64% of the enquiries are from old tenants with expansion and relocation purpose.

Regarding the future supply, this quarter recorded new completion dates of ongoing projects and two new projects in District 7. Four out of eight under-construction projects are located in District 7. When these buildings completed, competition between mature and new buildings is expected to reduce average rents of this cluster.


© 2016 CBRE Group Inc. We obtained the information above from sources we believe to be reliable. However, we have not verified its accuracy and make no guarantee, warranty or representation about it. It is submitted subject to the possibility of errors, omissions, change of price, rental or other conditions, prior sale, lease or financing, or withdrawal without notice. We include projections, opinions, assumptions or estimates for example only, and they may not represent current or future performance of the property. You and your tax and legal advisors should conduct your own investigation of the property and transaction.

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