CBRE PowerPoint Presentation Template · According to BCI Asia ... - ADB, Asia Economic Monitor, December 2011 - CBRE Vietnam | Page 16. CBRE Vietnam. Fearless Forecast 2012. 2011

Fearless Forecast“Do not let a good crisis go to waste”F e b r u a r y 2 0 1 2

Presented by:

Marc TownsendManaging DirectorCB Richard Ellis (Vietnam) Co., Ltd.

CBRE VietnamCBRE Vietnam | Page 2 Fearless Forecast 2012


AGENDA

Review CBRE 2011 Fearless Forecasts

Hanoi key projects 2011-2012

Vietnam 2011 key macroeconomic indicators

Hanoi RE market sectors Reviews/Forecasts 2012• Office

• Residential

• Retail

• Hotel

• Serviced Apartments

• M&A

CBRE 2012 MOST Fearless Forecasts


Review 2011 MOST Fearless Forecasts

Office Tenants• Multiple choices and softening rents

Hospitality• Ritz Carlton, St. Regis, Mandarin Oriental, Shangri-La and Four

Seasons to enter market within the next 5 years

Retail• Shopping centres grow in size on average !

• Non-CBD locations are dominating!

• Shopping centres open with high occupancy rates!


Review 2011 MOST Fearless Forecasts

Investors• Property investment remains dangerous for your health

• Change in asset class as gold dips and people moved in other directions

Developers• Marketing spend TRIPLES as developers search for new ways to sell / lease

their units

• Increased use of technology in property – building management systems, CRM systems

• Local companies seek capital through IPO’s and more sophisticated financial structures

• Some residential developers will convert units for sale to units for lease due to unsold units in completed buildings, or instituting rental pools (guarantees)

• Demand for data centres grows due to the continuing movement online, as our businesses become more immediate with wi-fi, smart phones and iPads. Developers prepared to deliver with the requirements needed to support these trends will profit.


Hanoi Changes 2011-2012

Indochina Plaza Hanoi Mipec Tower Keangnam Landmark 72

Feb ‘12

Jan ‘11


Hanoi Changes 2011-2012Vincom Village Hoang Thanh Tower

Feb ‘12

Oct ‘11

Feb ‘12

Feb ‘11


Hanoi Jan-Feb 2012

JW Marriott Royal City

Lotte Center Hanoi Mandarin Garden


All Future Projects HCMC Hanoi Da Nang Can Tho Nha Trang (Khanh Hoa)

Vung Tau

Hai Phong

Office 267 245 43 22 16 35 13

Retail 86 33 18 7 4 11 5

Hospitality and SA 44 53 28 12 37 19 6

Residential 311 268 134 10 22 32 9

Projects Under Construction HCMC Hanoi Da Nang Can Tho Nha Trang

(Khanh Hoa)Vung Tau

Hai Phong

Office 166 88 15 15 6 19 7

Retail 42 24 6 6 3 1 3

Hospitality and SA 25 32 17 5 10 8 2

Residential 142 104 19 3 5 14 5

According to BCI Asia…

Source: www.bciasia.com; CBRE Vietnam


Hanoi Key Projects

East of Hanoi to open up: crossing the river is not a psychological barrier anymore


Infrastructure 2011 MilestonesHanoi 2030-2050 Master plan approved (Jul 2011)

Roads & Bridges• City West: Mai Dich - Linh Dam elevated HW• City North: Nhat Tan - Noi Bai HW kicked off Nov ’11• City North: Nhat Tan Bridge • City South East: Vinh Tuy 1 Bridge completed; Vinh Tuy

2 Bridge to start construction

Metro lines• Ha Dong- Cat Linh: Ha Dong depot and 30% piers

under construction• Nhon- Hanoi Station: land-clearing

Proposal of 24 car parks to 2015 in inner city and along Ring Road No. 3 was approved

Air• North: Noi Bai’s Terminal 2 broke ground (75% ODA

funded) - 10 million arrivals per year

Construction of Mai Dich – Linh Dam HW on Pham Hung Rd

Ha Dong – Cat Linh Metro line at Hoang Cau

Vinh Tuy Bridge

Hanoi Infrastructure: Building to the next level


Infrastructure 2012Policies• Changing working hours is implemented• Limiting private cars in inner city is considered

Roads• 4 flyovers to be completed in 2012 (8 by 2015)• West: Pham Van Dong Road to be expanded• East: Nguyen Van Linh Road to be expanded• Hanoi- Lao Cai Highway to be completed by end 2012.

Construction of Nhat Tan Bridge Construction of Thai Ha – Lang Ha Flyover


Source: Historical data by GSO, 1GSO , 2SBV, 3 IMF, 4 SJC, 5 World Bank, 6 Ministry of Investment, 7Oxford Economics

2011 Vietnam Economic Overview2008 2009 2010 2011 e 2012 f

GDP Growth Rate (y-o-y) 6.2% 5.3% 6.8% 5.91 6.3 3

Lending Rate 12%12.75%

Down from 21% in Q3

16%-17.0%(Late 2010) 22% - 25%2 N/A

Inflation (Average, y-o-y) 22.9% 6.9%1 9.2%

(Dec‘10: 11.8%) 18.58%1 12.1% 3

Exports US$62.7 bil US$57.1 bil US$71.6 bil US$96.3 bil US$105.4 5

Imports US$80.7 bil US$69.9 bil US$84.0 bil US$105.8 bil US$113.3 5

Gold Price (per Tael)

VND17.8 mil(Dec. 31, 2008, up

7.2% y-o-y)

VND26.7 mil(Dec. 31, 2009, up 50% y-o-y)

VND36.1 mil(Dec. 31, 2010, up

35.2% y-o-y)

VND41.8mil4(Dec. 30,2011. up

15.8% y-o-y)N/A

US$/VND(Commercial banks)

17,400(Dec. 31, 2008)

18,497(Dec. 31, 2009)

19,500(Dec. 31, 2010)

Devalued by 5.4% vs. Dec. 2009

21,036(Dec.31, 2011)

Devalued by 7.9% vs Dec. 2010)

21,7357

US$/VND(Unofficial market)

17,510(Dec. 31, 2008)

19,470(Dec. 31, 2009)

21,010(Dec. 31, 2010)

21,275(Dec. 31, 2011) N/A

Committed FDI US$71.7 bil US$22.6 bil 1US$18.6 bil

(US$6.8 bil real estate)

US$14.7 bil 1

(US$845.6 mil real estate)

US$15 - 16 bil 6

Implemented FDI US$11.7 bil US$10 bil US$11 bil US$11 bil1 N/A


2011 Regional Economic Comparison

Source: Oxford Economics, Vietnamese General Statistics Office, World Bank, Goldprice.org, goldpricethai.com, pecunix.com

Hong Kong Thailand Singapore China Malaysia Vietnam Indonesia

GDP Growth Rate 4.9% 1.6% 5.0% 9.0% 4.9% 5.9% 6.3%

Consumer Price Index 5.3% 3.9% 5.0% 5.6% 3.2% 18.6% 5.4%

Gold Price( per gram in

US$ equivalent)US$51.80 US$50.50 US$52.18 US$51.88 US$52.17

US$53.002.2% higher

than regional average

US$52.72

Trade Balance -$55.4 bn $27 bn $48.3 bn $111.9 bn $47.1 bn -$9.5 bn $38.2 bn

FDI (net inflow in current US$,

2010)$68.9 bn $6.3 bn $38.6 bn $185.1 bn $9.5 bn

$11.0 bn(Source: World

Bank)$13.3 bn


A look ahead to 2012

2012 GDP (% y-o-y)

CPI (% y-o-y)

Vietnam 5.8 11.5

Hong Kong 3.5 3.6

Thailand 4.5 2.9

Singapore 3.3 2.8

China 8.1 3.5

Malaysia 4.9 2.8

Indonesia 6.2 5.0Source: Oxford Economics. Note: GDP growth for Vietnam in 2012, The World Bank, IMF and ADB range between 6.1% – 6.5%.

With demand from the eurozone and USexpected to remain weak for sometime, emerging East Asia should continue towork toward increasing intraregional tradeand financial integration, and expandinglinks with other emerging economies.

- ADB, Asia Economic Monitor, December 2011 -


2011 Economic Overview – InflationInflation continues…• Price of rebar in Hanoi:

– Dec 2010 - 15,500 VND/Kg– Nov 2011 - 18,050 VND/Kg

• Price of cement in Hanoi:– Dec 2010 - 1,200 VND/Kg–Nov 2011 - 1,500 VND/Kg

• Price of one carton of Heineken in Hanoi:– Jan 2011 - 340,000 VND– Jan 2012 - 370,000 VND

• Price of food and foodstuffs:– Dec. 2010: 16.2% y-o-y– Dec. 2011: 24.8% y-o-y

• CPI figure– Dec. 2010: 11.8% y-o-y– Dec. 2011: 18.13% y-o-y– 2011: 18.58% y-o-y

Source: General Statistics Office, Petrolimex

Fuel Price Change


Implemented FDI

2011 Economic Overview – FDI

Source: Ministry of Planning & Investment


2011 Economic Overview – Currencies

As per 2010, in 2011 the US Dollar appreciated in Vietnam.However, in 2011 the US Dollar also appreciated against the Thai Baht and Singapore Dollar

Source: Google Finance


2011 Vietnam Stock Market

Source: FPT Securities

At the beginning of 2011, some expected a rise. Going into 2012, some are wondering where the bottom is.VN Index dropped 28%, real estate companies fell approx. 45%Little support from those holding gold2012 YTD: the stock markets are up 19%!


2011 Regional Stock Market Comparison

Source: ADB

Since 01/01/2012 some Asian markets have picked up!?


2011 Gold Market

Vietnam market: in 2011, Gold price increased 25.7% y-o-y Global market: 2012’s average gold price to be US$1,766 per ounce, 12.3% increase from 2011’s, according to a survey by The London Bullion Market Association. HSBC predicts is US$1,850 per ounce.

Source: kitco.com

CBRE VietnamCBRE Vietnam | Page 22 Fearless Forecast 2012Source: vov.vn; giadinh.net.vn; tuoitre.vn ; 1star1objet.fr

2012: Gold Supply in Vietnam Increases

The magic from Trinh Duc’s performance in the Rugby World Cup is overshadowed by:• Quy Phuc is expected to win the gold in 100 m

freestyle• Anh Tuan is expected to win the gold in <56 kg

weightlifting• Ha Thanh is expected to win the gold in the floor

exercise


Car SalesKia New Morning VND357,000,000 (US$17,000)Entry Level Mercedes VND1,500,000,000 (US$70,000)VET: “Private passenger car sales saw a 22.1% JUMP to 40,858 units in 2011”

YoY CAR SALES GROWTH OF SOME MANUFACTURERS (2011)

Bentley GTC Speed in Hanoi

Car S

ales (

units

)


2011 International Arrivals

6 million to Vietnam (19.1% y-o-y)• 3.5 million to HCMC (13% y-o-y)• 1.3 million to Hanoi (4% y-o-y)

Tourism arrivals to Vietnam by country 2011

China 1,416,804 South Korea 536,408 Japan 481,519 US 439,872 Cambodia 423,440 Taiwan 361,051 Australia 289,762 Malaysia 233,132 France 211,444 Thailand 181,820 Others 1,438,779


2011 Government Decrees• Pricing in Dong

– Decree 95/2011/ND-CP dated October 20, 2011– VND must be used for quotation or advertising of goods and services, etc.

• Apartment Service Fees– Decision No. 4520/QĐ-UBND dated September 29, 2011:

– Statutory Apartment Service Fee: max VND4,000 (~US$0.2) psm

– Statutory Fee to be applied only when no agreement reached on Apartment Service Fee in advance

• Non-Agricultural Land-Use Tax– Decree No. 53/2011/ND-CP, effective from January 01, 2012– Pilot program for NALU Tax in 2011:

– To collect NALU tax in certain areas of Ha Noi, Can Tho City & Bac Ninh province.

– To identify taxation areas, connect & exploit databases of local agencies on tax & natural resources.

• Requirement for Environmental Impact Statement– Decree No. 29/2011/ ND-CP dated April 18, 2011:

– First guidance on the assessment of environmental impact

– Proscribes many requirements and procedures for specific development projects


Regional Rental Comparison

40

90

140

190

Thg6 07Thg12 07Thg6 08Thg12 08Thg6 09Thg12 09Thg6 10Thg12 10Thg6 1

RevPAR (MAT) Indexed

Vietnam Singapore

Local Currency

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$0

$10

$20

$30

$40

$50

$60

$70

$80

Price

(US$

psm

)

Rent

(US$

psm

per m

onth

)

LUXURY APARTMENT PRIME PRICES & RENTS IN KEY ASIAN MARKETS

Price Rent

As at Q4/2011:


Office – Supply & AbsorptionSupply by Grade (sm)

Supply by Location (sm)

Supply – Demand Dynamics

2012 new supply: 400,000 sm( 54% y-o-y)2012 absorption max: 100,000 sm2012 vacancy: 500,000 sm

Vacancy ?

1.11 mil.

1.48 mil.

2.4 mil.2.7 mil.

1.11 mil.1.48 mil.

2.4 mil.2.7 mil.

2011 2012F

Total Supply (sm) 700,000 1,100,000

New supply (sm) 220,000 400,000

Leased Area (sm) 530,000 630,000 % 73% 57%

Net absorption (sm) 101,000 100,000 % 15% 10%

Vacancy (sm) 200,000 500,000 Vacany rate 27% 43%

Only 10% vacancy in CBD area (20,000 sm)


Condominium - 3 Year Price MovementLuxury Condominium (US$ psm) High-end Condominium (US$ psm)

Mid-end Condominium (US$ psm)Low-end Condominium (US$ psm)

-3%Q2

Q4

Q1

Q4-7.5%

Q1Q4-7.5%

Q1Q4-6.5%


Condominium - 3 Year Price Movement

Luxury Condominium (US$ psm) High-end Condominium (US$ psm)

Mid-end Condominium (US$ psm) Low-end Condominium (US$ psm)

HN vs. HCMC

UpsideUpside

UpsideUpside

HN: Higher price level at

the same quality!

HN: Price upside potential in the past, but will eventually follow the flat/downward pattern of HCMC?


Condominium - Take-up vs. Hangover

HN Accumulated Unsold Units (Units)

HN Take-Up Rate (%)

HN Sold Units (Units)

- 2012 New Supply: 22,000 units- 2011 Accumulated Hangover: 16,500 units- 2011 Sales : 12,700 units- 2012 Total Supply: 38,500 units


25,100 21,600

4,000

0

5,000

10,000

15,000

20,000

25,000

30,000

2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F

Supp

ly (U

nits)

New Launch New Completion

Condominium - SupplyNew Launch vs. New Completion Supply

25,100

21,600

29,900

4,000

2011 2012F

Based on Developers’ Planning

Late hand-over: to be widespread ( large planned completion in +2012F

vs. small actual completion ~2011)

Some are waking up with their head in their hands


The Residential Nightmare

Q19,100 launches

0.8% price (q-o-q)

Q28,100 launches

0.7% price (q-o-q)

3,600 launches1.3% price (q-o-q)

Q34,300 launches

3.1% price (q-o-q)Q4

Resolution 11Dong Devaluation

(9.3%)

No. 4520/QD-UBND : cap Condo Service Fee at

VND4,000 psm (US$0.2) unless otherwise agreed

2012Death, Disc

ount or Opportunity

?

Doc. 8844 /NHNN-CSTT: Remove 4 real estate groups out of the non-

productive loan category

Discount Headlines

Property sector, the most attractive investment channel, but more cautious to invest in 1-3 years

(survey by Grant Thornton Vietnam)

More strict control on

dolarisation price list in VND

2030-2050 Hanoi Masteplan officially

approved

PVN Tower: 102 -> 79 floors

Some banks stopped offering

mortgage

PVN Tower: PVN withdrawal

Condo Service Fee disputes

More sales incentives: stop pegging condo prices to CPI

More heated Condo Service Fee disputes


Retail Market

Melinh Plaza Ha Dong

2011: Occupancy in CBD: 94%; Non-CBD: 88%2012: “Wild Wild West” – Tu Liem, Cau Giay and Ha Dong see highest additional supply in 2012 Indochina Plaza Hanoi

≈20%

≈12%

≈30%

Habico Tower

HN Retail – Supply & Vacancy 2011 (NLA) 2012F (GFA)

CBD Non-CBD CBD Non-CBD

Total Supply (sm) 42,000 205,000 56,000 365,000

New Supply (sm) 6,600 128,000 14,000 167,000

Vacancy (sm) 2,400 24,000 0 110,000

Vacancy rate (%) 6% 12% 0% 30%


Retail MarketDevelopment for international Brands Development for domestic Brands

Expansion of Hanoi’s Luxury NodeTrang Tien – a more luxurious Street in 2012

Maturing of VN Retail brands

Expansion of domestic Brands in secondary street locations (e.g. Kim Ma, Cau Giay Street)

Korloff – Hang Bai Street

Kenzo – Hang Bai / Ly Thuong Kiet Street

Trang Tien Plaza

Press Club

Gallery Royale

Kenzo & Korloff

Runway

MetropoleArcade

OperaBusiness

Center

Panerai – Metropole Arcade

Luxury Shop Expansions

Existing Luxury Shops


3,130

3,780

4,757

1,5101,750 1,837

0

1,000

2,000

3,000

4,000

5,000

2010 2011 2012-2013f

4-5 S

TAR H

OTEL

SUPP

LY (r

ooms

)

5 - star 4-star

Hotel Market

2012 – A challenging year for Hanoi Hotel Demand• A slight & smaller increase of int’l visitor arrivals• A small reduction in domestic arrivals

2012 Hanoi Hotel Performance• 4-5 star: Stable / slightly decreased ADR & Occupancy• 3-star: More stable RevPAR


Hotel Market

2012 - Year of local players• More Hotel Acquisition of Local Investors from Foreign Partners• Local Hoteliers: more aggressive in expanding high-end market share

New International Brands keep showing interest in Hanoi high-end market. Negotiations with several developers are actively underway.


Serviced Apartments 2012

“Vietnam will be the 11th most common destination of companies sending staff on international assignments up to 2013. Therefore, this is likely to ensure that the demand for accommodation from companies sending staff into Vietnam is likely to remain strong in the next three years”.

--- Trends in Managing Mobility Survey 2010, ECA International

Grand PlazaCrowne Plaza Landmark 72

More apartment buildings will be converted to serviced apartments, fully or partially, as condos struggle to sell.Supply:

• 2011: 2,400 units• 2012: 3,000 units

Performance differs by location:• Western area: Occupancy rate Below 50% (Q4/2011)

• 25% total supply (not yet including Landmark 72)

• The rest: Occupancy rate 90% in Q4/2011Top demand of <$2,500 budget for a studio / 1BR / 2BR

(units)


Investment Sales

We expect more investment sales to come in 2012

Pacific Place, HanoiQ4 2010 – Reported 12%

CentrePoint, HCMCQ2 2011 – Reported 10.6 – 11.3%

Saigon Tower, HCMCQ4 2011 – Reported 8.5%


2012 CBRE’s 10 Most Fearless Forecasts1. OFFICE

• Banks are still dominant occupiers. • Commercial office struggles, built-to-suit continues especially for banks• Tenants create the trend (large space occupiers create the market:

KPMG, PWC, Standard Chartered Bank others follow).• Western sub-market: occupancy to be positive, rents continue to drop (due to

competitiveness, not just because of excess supply) >< CBD prime office landlords still not reducing rents.

• 2011: landlords/tenants share the bargaining power. 2012: tenants have the upper hand

2. RESIDENTIAL• Real demand for products of 21 million VND or below• Developers expect margins to drop 15%-20%• Developers focus on quick returns & direct discounts on sales prices• Landed houses sell only in gated communities with good infrastructure & visible progress• Luxury residential in the CBD WILL sell.

3. RETAIL • New retail luxury node for Trang Tien area; • Multiple location tenants no longer happy to expand, or even plan to reduce premises;

while anchor retailers still pursuing long term plans. • Non-CBD: landlords and tenants: Live or Die TOGETHER• Expect to see some big empty spaces


2012 CBRE’s 10 Most Fearless Forecasts

4. East of Hanoi opens up: crossing the river is no longer a psychological barrier5. Stock market: 2012 closes on a much happier note!6. Deposit interest rates come down to 10%-12% pa7. Registered FDI into real estate triples in 2012 as Vietnam sees 20 new foreign

investors. 8. Gold price declines with new supply from Vietnam’s two gold medals at the

London Olympics 2012.9. Revenue from cleared sites skyrockets as they are converted into temporary car

parks, car wash, mini soccer fields, bia hoi, etc.10. Several big investment deals done between Local developers and Local/foreign

investors 11. Jack Dorsey to spend Christmas 2012 in Vietnam, @Townsend_Marc to have

50,000 followers


The most insightful real estate publication in Vietnam!

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CBRE Vietnam - HCMC & Hanoi Quarterly Reports

© 2012 CB Richard Ellis (Vietnam) Co., Ltd. This report has been prepared in good faith and with due care by CB Richard Ellis (Vietnam) Co., Ltd. We obtained some of theinformation above from sources we believe to be reliable. However, we have not verified the accuracy of the information which we obtained from other sources and make noguarantee, warranty or representation about it. We include projections, opinions, assumptions or estimates which are made with careful consideration of factors known to us forexample only, and they may not represent current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot bereproduced without prior written permission of CB Richard Ellis.

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CBRE PowerPoint Presentation Template · According to BCI Asia ... - ADB, Asia Economic Monitor, December 2011 - CBRE Vietnam | Page 16. CBRE Vietnam. Fearless Forecast 2012. 2011