Fearless Forecast Do not let a good crisis go to waste January 2012 Presented by: Marc Townsend Managing Director CB Richard Ellis (Vietnam) Co., Ltd.
HCMC 2011 Changes Taken on January 2, 2011 Times Square Saigon M&C Tower Eden A Taken on January 12, 2012 CBRE Vietnam Page 2 CBRE Vietnam Fearless Forcast 2012
HCMC 2011 Changes Taken on January 2, 2011 Vietcombank Tower VietinBank BIDV Tower Taken on January 12, 2012 CBRE Vietnam Page 3 CBRE Vietnam Fearless Forcast 2012
HCMC 2011 Changes Saigon Centre (phase 2) Taken on January 2, 2011 Ben Thanh Towers Taken on January 12, 2012 CBRE Vietnam Page 4 CBRE Vietnam Fearless Forcast 2012
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 Refurbished retail areas appear (Saigon Square #3) Shipyards moving towards development Growth of mini-malls due to lack of land (< 3,000 sm) Larger retail areas coming up outside of traditional areas District 5 (Tan Da Shopping Center), and Binh Duong (Becamex New City) CBRE Vietnam Page 5 CBRE Vietnam Fearless Forcast 2012
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. CBRE Vietnam Page 6 CBRE Vietnam Fearless Forcast 2012
2011 Vietnam Economic Overview GDP Growth Rate (y-o-y) Lending Rate 12% Inflation (Average, y-o-y) 2008 2009 2010 2011 e 2012 f 6.2% 5.3% 6.8% 5.9 1 6.3 3 12.75% Down from 21% in Q3 16%-17.0% (Late 2010) 22.9% 6.9% 1 9.2% (Dec 10: 11.8%) 22% - 25% 2 N/A 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$113.3 5 Gold Price (per Tael) VND17.8 mil (Dec. 31, 2008, up 7.2% y-o-y) VND26.7 mil (Dec. 31, 2009, up 50% y-o-y) VND36.1 mil (Dec. 31, 2010, up 35.2% y-o-y) VND41.8mil 4 (Dec. 30,2011. up 15.8% y-o-y) N/A US$/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) 21,735 7 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 1 US$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$11 bil 1 N/A Source: Historical data by GSO, 1 GSO, 2 SBV, 3 IMF, 4 SJC, 5 World Bank, 6 Ministry of Investment, 7 Oxford Economics CBRE Vietnam Page 7 CBRE Vietnam Fearless Forcast 2012
2011 Regional Economic Comparison Hong Kong Thailand Singapore China Malaysia Vietnam Indonesia GDP Growth Rate 4.9% 1.6% 5.0% 9.0% 4.9% 5.9% 6.3% Consumer Price Index 5.3% 3.9% 5.0% 5.6% 3.2% 18.6% 5.4% Gold Price ( per gram in US$ equivalent) US$51.80 US$50.50 US$52.18 US$51.88 US$52.17 US$53.00 2.2% 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 $8.0 bn (Source: World Bank) $13.3 bn Source: Oxford Economics, Vietnamese General Statistics Office, World Bank, Goldprice.org, goldpricethai.com, pecunix.com CBRE Vietnam Page 8 CBRE Vietnam Fearless Forcast 2012
A look ahead to 2012 With demand from the eurozone and US expected to remain weak for some time, emerging East Asia should continue to work toward increasing intraregional trade and financial integration, and expanding links with other emerging economies. - ADB, Asia Economic Monitor, December 2011-2012 GDP (% 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 5.0 CPI (% y-o-y) 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% 2000 Q1 Source: Oxford Economics. Note: GDP growth for Vietnam in 2012, The World Bank, IMF and ADB range between 6.1% 6.5%. 2001 Q1 2002 Q1 CBRE Vietnam Page 9 CBRE Vietnam Fearless Forcast 2012 2003 Q1 2004 Q1 2005 Q1 2006 Q1 World Western Europe Asia-Pacific United States 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1
2011 Economic Overview FDI Implemented FDI COMMITTED FDI, 2010 COMMITTED FDI, 2011 24.9% 36.8% Real estate Processing Manufacturing Industry 5.8% 34.3% Real estate Processing Manufacturing Industry 1.7% Construction Construction 9.3% Hotels and restaurants 2.9% 48.5% Hotels and restaurants 27.3% Others 8.5% Others Source: Ministry of Planning & Investment CBRE Vietnam Page 10 CBRE Vietnam Fearless Forcast 2012
2011 Vietnam Stock Market Index At the beginning of 2011, some expected a rise. Going into 2012, some are wondering where the bottom is. VN Index drops 27.5%, real estate companies fell by approx. 45% Little support from those holding gold. 550 500 450 400 350 300 4-Jan 1-Feb 1-Mar 29-Mar 26-Apr 24-May 21-Jun 19-Jul 16-Aug 13-Sep 11-Oct 8-Nov 6-Dec 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Trading Value (Billions VND) Trading value VNIndex Source: FPT Securities CBRE Vietnam Page 11 CBRE Vietnam Fearless Forcast 2012
2011 International Arrivals Millions 2011: 6 million international arrivals to Vietnam (19.1% y-o-y) and 3.5 million to HCMC (13% y-o-y) 7 6 5 4 3 2 1 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Vietnam Source: General Statistics Offices; bistrochic.net HCMC Tourism arrivals 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 CBRE Vietnam Page 12 CBRE Vietnam Fearless Forcast 2012
Car Sales Nguyen Van Linh the automobile hub, further growth expected; Kia New Morning VND357,000,000 (US$17,000); Entry Level Mercedes VND1,500,000,000 (US$70,000); Car Sales (unit) $120000.0 $100000.0 $80000.0 $60000.0 $40000.0 $20000.0 $.0 CAR SALES IN VIETNAM 2007 2008 2009 2010 11M/2011 Car Sales by Manufacturer in Vietnam 100% 90% 80% 79% 82% 70% 60% 50% 40% 34% 34% 30% 20% 10% 0% Mekong (Fiat, Ssangyong, PMC) VMC (BMW, Mazda, Kia) 7% GM Daewoo 2% VinaStar (Mitsubishi) Mercedes-Benz Vietnam Visuco (Suzuki) 22% Toyota CBRE Vietnam Page 13 CBRE Vietnam Fearless Forcast 2012
2011 Government Decrees New in 2011: Pricing in Dong Decree 95/2011/ND-CP states that VND must be used for quotation or advertising of goods and services, etc. Relating to Apartment Service Fees Decision No. 4520/QĐ-UBND provides that the statutory Apartment Service Fee Rates shall be applied only when the parties has not yet agreed on the Apartment Service Fee in advance Non-Agricultural Use Tax Decree No. 53/2011/ND-CP Pilot program for NALU Tax, Prior to enforcement of Decree No. 53 on January 01, 2012, The Ministry of Finance is unrolling a pilot program to collect non-agricultural land-use tax in certain local areas of Hà Nội, Cần Thơ cities and the Bắc Ninh province. The pilot stage will focus on identifying taxation areas as well as connecting and exploiting the databases of local agencies on tax and natural resources. Requirement for Environmental Impact Statement Decree No. 29/2011/ ND-CP dated April 18, 2011 is the first guidance on the assessment on environmental impact Proscribes many requirements and procedures to that are required for specific development projects CBRE Vietnam Page 14 CBRE Vietnam Fearless Forcast 2012
The Original Golden Sites Of the 20 Golden sites: 2 completed 2 under development 16 sites awaiting action CBRE Vietnam CBRE Vietnam CBRE Vietnam Page 15 Fearless Forcast 2012
Infrastructure 2011 Milestones Roadways T3 Thu Thiem Tunnel The ten year Nhieu Loc - Thi Nghe Canal Road widening project is completed On August 24, the first Bus Rapid Transport (BRT) route in the city opened from Ben Thanh Market, to Mien Tay Bus Station. Metro lines The expected cost of Metro Line 1 has almost doubled, with progress in compensation. Tramway Line No. 1 is being restructured into a Bus Rapid Transit (BRT) system at reduced cost. Air Da Nang s new airport terminal opens! Prime Minister Dung officially approved Long Thanh International Airport s master plan. The airport has an area of 5,000 hectares with investment capital of US$6.7 billion for the first phase. Vietjet Air, a new private airline, started operation. (1 Airbus, 2 on order). CBRE Vietnam CBRE Vietnam Nhieu Loc - Thi Nghe Canal Road Source: www.info.vn Da Nang New Terminal Source: Tuoi Tre CBRE Vietnam Page 16 Fearless Forcast 2012
2012 Infrastructure Roads: Construction of the four main roads in the Thu Thiem new urban area will start in July, 2012 Completion is expected 2015. East West Highway Bridge: Saigon Bridge No. 2, with four lanes, will start constructed in April, 2012, and will take 22 months to be completed. Bus system: In 2012, the city will focus on improving the bus system and services, implementing solutions to improve the backbone of the city s transportation. CBRE Vietnam Page 17 CBRE Vietnam Fearless Forcast 2012
According to BCI Asia All Future Projects HCMC Hanoi Da Nang Can Tho Nha Trang (Khanh Hoa) Vung Tau Hai Phong Office 267 245 43 22 16 35 13 Retail 86 33 18 7 4 11 5 Hospitality and SA 44 53 28 12 37 19 6 Residential 311 268 134 10 22 32 9 Projects Under Construction HCMC Hanoi Da Nang Can Tho Nha Trang (Khanh Hoa) Vung Tau Hai Phong Office 166 88 15 15 6 19 7 Retail 42 24 6 6 3 1 3 Hospitality and SA 25 32 17 5 10 8 2 Resi 142 104 19 3 5 14 5 Source: www.bciasia.com; CBRE Vietnam CBRE Vietnam Page 18 CBRE Vietnam Fearless Forcast 2012
Office - Rents Grade A Rents (US$ psm) $60 $50 $40 $30 Rents 3 year 1 year 1 quarter Grade A -55.0% -8.3% -5.8% Grade B -44.0% -7.5% -1.5% Grade C -41.5% -8.5% -3.0% $20 2009 2010 2011 $30 Grade B Rents (US$ psm) $25 $20 $15 $10 2009 2010 2011 Grade C Rents (US$ psm) $30 $25 $20 $15 $10 2009 2010 2011 CBRE Vietnam Page 19 CBRE Vietnam Fearless Forcast 2012
Vacancy 3 year 1 year 1 quarter Grade A 23.4 pt -14.6 pt -6.1 pt Grade B 14.4 pt 3.3 pt -0.7 pt Grade C -2.6 pt -1.9 pt -0.1 pt Office - Vacancy 40% 30% 20% 10% Grade A Vacancy 0% 2009 2010 2011 20% Grade B Vacancy 15% 10% 5% 0% 2009 2010 2011 Grade C Vacancy 20% 15% 10% 5% 0% 2009 2010 2011 CBRE Vietnam Page 20 CBRE Vietnam Fearless Forcast 2012
Luxury Condominium (US$ psm) $4,500 3 Year Residential Price Movement High-end Condominium (US$ psm) $4,400 $1,950 $4,300 $1,920 $4,200 $1,890 $4,100 $1,860 $4,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2010 2011 Secondary Asking Price (US$/sm) $1,830 $1,800 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2010 2011 $6,000 Luxury Mid-end High-end Affordable $4,000 $2,000 Mid-end Condominium (US$ psm) $0 2007 2008 2009 2010 2011 Affordable Condominium (US$ psm) $1,020 $990 $960 $930 $900 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2010 2011 CBRE Vietnam Page 21 CBRE Vietnam Fearless Forcast 2012 $730 $710 $690 $670 $650 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2010 2011
Take-up vs. Hangover 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Take-Up Rate (%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2010 2011 Luxury High-end Mid-end Affordable Unsold Units Accumulated (Units) Some are waking up with their head in their hands Unsold Units by Segment 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Total Unsold Units 2009 2010 2011 Luxury High-end Mid-end Affordable Total CBRE Vietnam Page 22 CBRE Vietnam Fearless Forcast 2012
The Residential Nightmare Dong Devaluation (9.3%) More strictly control on dolarisation price list in VND Resolution 11 Q1 5,078 launches 2,229 sales Q2 4,926 launches 1,390 sales Int l banks stopped mortgage lending 2012 Death, Discount or Opportunity? Discount Headlines 1,096 launches 846 sales Q4 Goldora Villa sold to ICC 864 launches 1,867 sales Q3 More incentives to stimulate sales Property sector, the most attractive investment channel, but more cautious to invest in 1-3 years (survey by Grant Thornton Vietnam) Doc. 8844 /NHNN-CSTT: Remove 4 real estate groups out of the nonproductive outtsatnding loan category The Ascott signed Diamond Island (D.2) CBRE Vietnam CBRE Vietnam US$6,000/unit in Binh Duong CBRE Vietnam Page 23 Fearless Forcast 2012
The past 18 months has seen shopping centre rentals create a buzz; 2012, we expect department store rentals to come back to the forefront: Lack of quality space in the CBD; Still a softening on rents 2012, shopping centre rentals in the CBD to remain soft; Saigon Centre phase 2, the CBD retail hub on the horizon; First new supply in CBD with department store; Non-CBD Asking Rents (US$/sm/month) Retail Department Store vs. Shopping Centre CBD Asking Rents (US$/sm/month) $140 $120 $100 $80 $60 $40 $20 $0 Source: CBRE Vietnam Department Store 2008 2009 2010 2011 Shopping Centre $100 $80 $60 $40 $20 Department Store Shopping Centre 1 st quality shopping centre outside the CBD Crescent Mall; However, rentals still softening as retailers have multiple options and established SHOPHOUSE location remain popular; $0 2008 2009 2010 2011 Source: CBRE Vietnam CBRE Vietnam CBRE Vietnam CBRE Vietnam Page 24 Fearless Forcast 2012
Hotels 2012 Occupancy and RevPAR both showing signs of growth in 2011. Coastal markets such as Phu Quoc, Nha Trang and Da Nang showed a higher RevPAR growth rate than HCMC: 60 55 50 45 40 35 30 25 20 RevPAR (US$/room/night) 2009 2010 2011F HCMC Da Nang Phu Quoc Nha Trang Phu Quoc continues to lead the coastal market with 20% y-o-y increase in RevPAR, expected to be an attractive destination for investors in 2012. The operation of new Da Nang International Airport terminal in December,2011 facilitates more direct international flights to Da Nang from locations such as Seoul and Kuala Lumpur. CBRE Vietnam Page 25 CBRE Vietnam Fearless Forcast 2012
Da Nang Hotels/Resorts/2 nd Home 2012 2011 y-o-y increase in visitors was 34%, of which international visitors increased 44% y-o-y The Hyatt Regency came online in Q4 with 200 five-star rooms, 2012 expects InterContinental, Le Meridien, Melia and Pullman to enter DN In 2012, the DN hospitality market will target Russian tourists with direct Russia Da Nang flights in consideration Da Nang market continues to perform with 60% of the 40 villas launched at The Point sold within three months No construction expected in 2012 without pre-sales Projects away from the coast see action too WTC leasing (anchors already signed) and Azura to complete Q2 CBRE Vietnam Page 26 CBRE Vietnam Fearless Forcast 2012
Serviced Apartments 2011 Demand derived from 3 sources: Professional expatriates main source Both from Asia and the West Hanoi: employees in the Embassies Returning Overseas Vietnamese Wealthy Vietnamese a new and growing trend Proportion of Requested Area (sm) 0-60 60-100 100-160 160+ 100% 80% 60% 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 40% 20% Proportion of Housing Budget (US$/month) 0% Q1/2011 Q2/2011 Q3/2011 Q4/2011 Source: CBRE Residential Leasing TOP DEMAND! $0 -$1200 $1200 - $2500 $2500 - $3500 $3500+ H1/2011 work permits issued to foreigners in HCMC: Achieved 85.1% of entire 2009 Down 16.5% against H1/2010 Q4/2010 10.0% 40.0% 40.0% 10.0% Q1/2011 17.9% 41.5% 29.2% 11.3% Q2/2011 20.5% 48.2% 24.1% 7.2% Q3/2011 11.7% 52.1% 26.6% 9.6% Source: CBRE Residential Leasing CBRE Vietnam Page 27 CBRE Vietnam Fearless Forcast 2012
ILS 2012 Forecast Logistics component becomes a must in industrial park zoning. Logistics to grow as Asian regional trade buoys economy through Eurozone crisis and slower US growth. Japanese investment KEY. Both from Japan directly, and from Japanese companies relocating out of Thailand. Potential growth areas: Food & Beverage for South Vietnam Electronics for North Vietnam. Ready Built Factory rental rates come down as more supply than ever before. With the increasing profile of industrial in Vietnam, more investors seek wholesale purchases of operating IPs. CBRE Vietnam Page 28 CBRE Vietnam Fearless Forcast 2012
The Rise of Investment - The Institutional Deal And a notable variance in yield Pacific Place, Hanoi Q4 2010 Reported 12% CentrePoint, HCMC Q2 2011 Reported 10.6 11.3% Saigon Tower, HCMC Q4 2011 Reported 8.5% At least three more institutional deals to come in 2012 CBRE Vietnam CBRE Vietnam CBRE Vietnam Page 29 Fearless Forcast 2012
On December 31, 2012 1. Nguyen Trai still the retail king! CBRE s 10 Most Fearless Forecasts 2. Square office buildings back in fashion! The best tenant deals will have happened in the first half of 2012. 3. Any residential project that hasn t broken ground will gravitate to the affordable (new middle class, less than 21,000,000VND psm) segment. 4. Luxury residential in the CBD WILL sell. 5. Golf Boom or Bust?!? 6. Revenue from cleared sites skyrockets as they are converted into drive-in movie theatres and Circle K. 7. Burger King opens at Da Nang airport and Sushi Bar opens in Phu Quoc as overseas visitors increase a further 20%. 8. In the short-term the new Pudong is not Thu Thiem, it is District 4. 9. Gold price declines with new supply from Vietnam s two gold medals at the London Olympics 2012. 10. Registered FDI into real estate triples in 2012 as Vietnam sees 20 new foreign investors. 11. Jack Dorsey to spend Christmas 2012 in Vietnam, @Townsend_Marc to have 50,000 followers CBRE Vietnam Page 30 CBRE Vietnam Fearless Forcast 2012
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 Source: vov.vn; giadinh.net.vn; tuoitre.vn ; 1star1objet.fr CBRE Vietnam Page 31 CBRE Vietnam Fearless Forcast 2012
CBRE Vietnam - HCMC & Hanoi Quarterly Reports The most insightful real estate publication in Vietnam! Plan your future with two quarter and eight quarter forward looking analysis. Contact for free sample: quarterlyreports@cbrevietnam.com THANK YOU 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 the information 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 no guarantee, warranty or representation about it. We include projections, opinions, assumptions or estimates which are made with careful consideration of factors known to us for example 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 be reproduced without prior written permission of CB Richard Ellis. CBRE Vietnam Page 32 CBRE Vietnam Fearless Forcast 2012