1H 2014 Savills World Research
Viet Nam
Asia ian n Ci Citities es Re Repo port rt As Viet Vi et Na Nam m Offi Office ce
1H 2014
savills.com.hk/research
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Asian Cities Report | Viet Nam N am Office
GRAPH 1
Introduction
Stock by grade, Q4/2013
The rapid economic growth of the early 2000s was followed by the development and emergence of the office-for-lease office-for -lease markets in Ho Chi
Grade A
Grade B
Grade C
1,600 1,400
Giay, in the western non-CBD area, Giay, is the market leader with more than 330,000 sq m of stock, accounting for a 25% market share.
Market performance Minh City (HCMC) and Ha Noi from 2006 to 2008. However However,, the global recession in 2008 and Viet Nam’s struggling macro economy from 2009 to 2012 negatively affected this trend.
1,200 ) d 1,000 n a s u o 800 h t ( m q 600 s
Given the signs of macro economic recovery in 2013, the office leasing market in HCMC is expected to recover. However, the Ha Noi office market may take longer to turn around, mainly due to large amounts of available stock in some locations, especially in the western area of the city.
400 200 0 Ha Noi
HCMC
Source: Savills Research & Consultancy
GRAPH 2
The office market softened in 2009, influenced by the global market downturn. This was reflected in the downward trend in office indices for both HCMC and Ha Noi. More recently,, there have been indications recently that HCMC is recovering while the downtrend is still evident in Ha Noi. In HCMC, the rate of decline in the office index slowed and became relatively stable in 2012 and the first half of 2013. It then rose slightly in the second half of 2013. A stronger
Office indices, 2009–2013 Ha Noi
The recent strong recovery in foreign direct investment (FDI), along with satisfactory GDP growth, will have a positive impact on demand in the two largest cities of Viet Nam.
HCMC
100
80
0 0 1 = 9 0 0 2 / 1 Q
Total office stock in Ha Noi and HCMC is approximately 2.7 million sq m, distributed broadly between the two cities, in approximately 370 projects across all grades.
The Ha Noi office index dropped continuously in 2012 and 2013, showing declines in both occupancy and market rent. This is likely to continue in the short term, as current stock levels are high, with considerable supply expected in the near term.
The HCMC market comprises
By the end of 2013, average
221 projects of approximately 1.4 million sq m. Grade B properties dominate the market with a 45%
occupancy rates had increased by 4 percentage points (ppts) year-onyear (YoY) (YoY) in HCMC, the highest in the last two years. Total Total take-up in 2013 totalled approximately 120,000 sq m, up 27% YoY.
Supply
60
40 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009
2010
2011
2012
2013
Source: Savills Research & Consultancy
GRAPH 3
HCMC market performance, Q1/2012–Q4/2013 Le as ase d ( LH LHS)
Va ca ca nt nt ( LH LHS)
Re nt nt ( RH RHS)
1,400
30
1,200
share, followed by Grade C with 44% and Grade A with 11%. Stock is concentrated in the CBD, including districts 1 and 3, accounting for more than 60% of the total. In Ha Noi, total office stock stands at approximately 1.3 million sq m in 153 projects. Grade B space accounts for the largest market share at 44%, followed by Grade C with 33% and Grade A with 23%. More
Average rents in HCMC trended trended downward from 2011 to 2012. However,, by the end of 2013, rents However had increased by 2% over the first quarter.. This was due mainly to a quarter slowdown in supply and more rapid growth in demand, gradually driving rents up. Compared with 2012,
than 60% of stock is located in four CBD districts, namely Hoan Kiem, Dong Da, Ba Dinh and Hai Ba Trung. However,, on a district basis, Cau However
demand grew by 11% but supply increased by only 5% in 2013. This trend is expected to continue amid limited short-term supply supply..
25 U
S $ p e r s q m 20 p e r m o n t h
1,000 ) d n a 800 s u o h t ( 600 m q s
400
15
200
0
10 Q1
Q2
Q3
Q4
2012
Source: Savills Research & Consultancy
Q1
Q2
Q3 2013
performance, especially in the Grades A and B segments, is the main contributor to the recovery in HCMC.
Q4
02
1H 2014
In 2013, take-up in the CBD stood at
US$23 billion and then decreased in
GRAPH 4
more than 77,000 sq m, 84% greater
the years to 2012 due to the financial difficulties of the domestic and global economies. However, However, in 2013, FDI to Viet Nam increased, registering US$21.6 billion, up 55% YoY.
Ha Noi market performance, Q1/2012–Q4/2013
than the non-CBD and up 98% compared with 2012. This difference is mainly attributed to more affordable rents in the CBD, which has attracted tenants to relocate their offices. The Ha Noi office market has continued to trend downwards in both occupancy rates and rents. In 2013, there was a supply increase of 15% while the total leased area only rose by 12%. By the end of 2013, average occupancy was down by 2 ppts YoY, while average rents fell by 10% YoY. Although there
L eas eased ed (L (LHS HS))
Vac acan antt (L (LHS HS))
Ren Re n t (R (RHS HS))
1,400
30
1,200 U
25 S
1,000
GDP growth peaked in 2010, before falling in 2011 and 2012. However, in 2013, GDP growth rose to 5.42% per annum, up slightly by 0.17% YoY. According to Focus Economics Consensus Forecast 2014, the
400
15
200
projected GDP growth rate of Viet
0
10 Q1
Nam for 2014 is 5.5%, signalling the start of a recovery, which will in turn, help to leverage domestic demand
$ p e r s q m 20 p e r m o n t h
) d n a 800 s u o h t ( 600 m q s
Q2
Q3
Q4
Q1
2012
Q2
Q3
Q4
2013
Source: Savills Research & Consultancy
for the office market.
was an increase in the total leased area, total take-up in 2013 was 13%
Future supply
lower than in the same period of the previous year. High levels of supply
Up to 2016, 230 projects will be launched, adding more than 1 million
have pressured non-CBD projects to
sq m to the market.
reduce their rents. HCMC will receive more than In 2013, total office take-up in
402,000 sq m of additional office
the non-CBD western area was
space, over half of which (66% or
approximately 67,000 sq m,
260,000 sq m) will be located in
accounting for 70% of stock. Major
district 1 in the CBD. In 2014, despite
new infrastructure developments,
more than 156,000 sq m entering
a high concentration of beneficial
the market, developers will occupy
services, such as government
a considerable portion of this, and
establishments, and lower rents have
therefore, actual available supply will
helped the western area attract more
be limited in the short term.
GRAPH 5
FDI, 2009–2013 Total registered capital
FDI disbursement
25
20
) 15 n o i l l i b ( $ S U10
5
0 2009
2010
2011
2012
2013
Source: General Statistics Office of Viet Nam
tenants. Ha Noi’s future supply for the next
Market drivers
three years is expected to total
According to a recent recent survey by
640,000 sq m, 61% more than in HCMC. The western areas of Cau Giay and Tu Liem have the largest share of approximately 243,000 sq m or 38% of supply supply.. This will have an
Savills, overseas companies account for approximately 60% of take-up of Grade A and B offices, while local companies account for 40%. The main tenant types are banking and finance, services, distribution,
adverse effect on the office market performance in this area.
and representative offices of manufacturing and processing
Market prospects
companies.
Office demand in HCMC is expected to be high while mid-term supply
Growing FDI will drive office demand,
GRAPH 6
Future supply pipeline, 2014E–2016E HCMC
Ha Noi
300
250
) d 200 n a s u o h t ( 150 m q s
100
may be low. 50
as FDI companies open new offices or expand their businesses. FDI inflow to Viet Nam reached its peak in 2009 at a total registered capital of
In Ha Noi, there are still high levels of office stock in the western area, despite good annual take-up rates.
0 2014E
Source: Savills Research & Consultancy
2015E
2016E
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