Read this research and forecast report for Vietnam. It covers macro economic environment as well as the commercial real estate industry.

1. Q3 2013 | VIETNAM OVERVIEW
vietnam
research & forecast Report
www.colliers.com/vietnam

2. Vie tnam Propert y Marke t At a Gl ance
Q3
2013
HCMC
HANOI
Office
Retail
Rent Occupancy Demand
Rent
healthy
stable
Residential
Primary Secondary Sold
Occupancy Demand
price
price
rate
weak
healthy
Table of Contents
Economy of Vietnam
• Vietnam’s economy sees positive signals in Q3 2013
• New legislations were reviewed to rescue the market
• VMAC buys US$110 million of Agribank’s bad debts
Ho Chi Minh City and Hanoi’ s Economic Update
Ho Chi Minh City Infrastructure Update
Ho Chi Minh City Property Market
Office
• Market Overview
• Market Performance
• Market Outlook
Retail
• Market Overview
• Market Performance
• Market Outlook
Residential
• Market Overview
• Market Performance
• Market Outlook
Hanoi Property Market
Office
• Market Overview
• Market Performance
• Market Outlook
Retail
• Market Overview
• Market Performance
• Market Outlook
Residential
• Market Overview
• Market Performance
• Market Outlook
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Demand
healthy
healthy

3. VIETNAM | Q3 2013 | ECONOMIC UPDATE
VIETNAM’S ECONOMY SEE POSITIVE SIGNALS IN Q3 2013
Vietnam’s Gross Domestic Product (GDP) in Q3 was higher than
previously forecasted by the Government thanks to prioritized efforts to
help maintain macro-economic stability and curb inflation. The GDP has
increased 5.54% compared with the same period in 2012 and is steadily
improving quarter over quarter (first quarter: 4.89%, second quarter: 5.00%).
Foreign direct investment (FDI) is estimated at US$15 billion in the first
nine months of 2013, exceeding the target of US$13-14 billion for the
whole year. FDI capital expenditure during this year also continued to rise
from the last year representing a 6.4% y-o-y increase and approaching
the entire 2013 target of US$10.5-11 billion.
VIETNAM’S GDP GROWTH RATE
Source: GSO
VIETNAM’ S CPI MONTH-ON-MONTH
In the industrial manufacturing sector production levels have increased
while the production index jumped 5.4% in September. However, import
growth rates of raw materials remained modest, suggesting that inventory
stocks are being reduced and production efficiencies are being examined.
In the retail sector, January-September retail sales of goods and services
increased by 12.5% against the same period last year but profit margins
of retailer have seen a decline with the offering of incentives and price
reductions to entice purchasing of goods.
NEW LEGISLATIONS WERE REVIEWED TO RESCUE THE MARKET
Vietnam continues to improve its economic environment and increase
foreign capital investment.
A recent proposal by the Ministry of Construction, will allow foreigners
who have been granted a residence visa of over three months to be
allowed to buy dwellings. Suggested legislation will also include foreign
investment funds and commercial banks, as well as branches and
representative offices of foreign companies currently in operation in
Vietnam. The Ministry has also proposed that foreigners may rent, sell
or donate houses that they own 12 months after the house ownership
certificates have been granted. However, the report suggested that
Source: GSO
applicable purchaser can only buy properties with a
maximum land plot area of 500 sq m. It is hoped that these
changes, if approved, will give a boost to the residential
market.
The State Securities Commission (SSC) has submitted
to the government the plan to raise the ceiling foreign
ownership ratio, to encourage foreign investment and
securities. They hope to raise the ceiling from 49% to 60%
which would bring big changes to listed companies.
REGISTERED & DISBURSED FDI
EXPORT & IMPORT TURNOVER
Source: GSO
Source: GSO
VAMC BUY US$110 MILLION OF AGRIBANK’S BAD DEBTS
This year has seen the Government take increased action to control
bad debts. The Vietnam Asset Management Company (VAMC) which
opened on July 26. is a wholly-state-owned business directed entirely
at managing the bad debts of the financial industry. The first bad debts
purchase between Agribank and VMAC on October 1, and there are
several more banks preparing to do the same. While this will transfer
debts off the books of lending institutions, plans to resolve and sell
these debts have yet to materialize.
TOTAL RETAIL SALES OF GOODS AND SERVICES REVENUE
Source: GSO
P.1 | Colliers International

4. HO CHI MINH & HANOI | Q3 2013 | ECONOMIC UPDATE
HO CHI MINH CITY ECONOMIC UPDATE
HANOI ECONOMIC UPDATE
As reported by its Statistics Office of Ho Chi Minh City, recorded
Hanoi’s GDP growth in Q3 2013 reached 7.88%, a 21% increase
a growth rate of 10.3% in the third quarter of 2013, up 0.7%
from last quarter.
against the same period in the previous year. Year to date, the
The service industry showed the greatest growth in Q3 of 8.9%,
Committee has licensed 291 new FDI projects with a total regis-
followed by construction and industry at 7.42%. Increase in pe-
tered capital of US$650.7 million.
troleum, tuition and health services fee, contributed to a jump in
In addition, 94 projects increased their investment capital with
Hanoi’s Consumer Price Index (CPI). Inflation stands at 6.17% in
of US$604.8 million. Total retail sales of goods and service was
the first a month over the same period last year.
estimated at VND 441,076 billion from January to September,
Hanoi has attracted a total of $741.92 million of new registered
up 12.2% and the September’s consumer price index increased
FDI this year, approximately. 57% of its annual target for 2013.
3.13% compared to the previous month.
Based on y-o-y comparison, the registered capital decreased ap-
International arrivals went up 3% to 2.8 million, fulfilling 68%
proximately 17% although the number of projects increases 6.5%.
of its 4.1 million yearly target, and estimated revenue generated
International visitors to Hanoi this year reached 1.3 million, a
from arrivals was VND 62,396 billion, a year-on-year increase of
20.1% y-o-y increase.
20%, 77% of this year’s target.
CPI MONTH-ON-MONTH
GDP GROWTH RATE
Source: GSO
Source: GSO
FOREIGN INVESTMENT CAPITAL
RETAIL SALES GROWTH RATE
Source: GSO
Source: GSO
P.2 | Colliers International

5. HO CHI MINH CITY & HANOI | Q3 2013 | INFRASTRUCTURE
DAU GIAY - PHAN THIET EXPRESSWAY
Ho Chi Minh City
Plans are underway for a Dau Giay – Phan Thiet Expressway. Targeted
for completion in 2019, this four-lane, 100-kilometre expressway will
connect HCMC to the south-central city of Phan Thiet – significantly
reducing travel time.
The Bitexco Group has already been selected by the Government and
the World Bank as part investor for the US$757 million Dau Giay –
Source: Internet
NEW PROJECTS IN HO CHI MINH CITY
Phan Thiet Expressway Project, with a secondary bidding round to select the second investor for the project taking place in the year ahead.
Q3 also swathe completion of:
>> Two steel flyovers in 3/2 - Ly Thai To in District 10 and Hoang Hoa
Tham - Cong Hoa in Tan Binh District.
>> A five-kilometre section of the Tan Son Nhat - Binh Loi Outer Ring
Road opening to traffic on September 28 and running from Nguyen
Thai Son intersection to National Highway 13.
>> The Saigon 2 Bridge linking District 2 and Binh Thanh District. The
bridge is expected to serve around 40% of the traffic crossing the
Sai Gon River from the city.
Source: Internet
CAT LINH - HA DONG METRO ROUTE
Hanoi
During Q3/2013, Hanoi managed to speed up its metro project. Until
July 2013, the 2A route connecting Cat Linh and Ha Dong districts has
finished land clearance for the 23.3-ha depot in Ha Dong District and
9.7 of 13km railway are ready for construction. 255 of 421 bridge piers
and 7 of 12 stations have been constructed. Whereas the training plan
for management and operation team of this project have been finished,
Source: Internet
NATIONAL ROAD NO. 5 PROLONG
the main contractor EPC is seeking for train providers. This route is
expected to come into operation in Q1/2015.
In the new expansion area of Hanoi, the National Road No.5 Prolong
is one of the focus projects with strong support from Hanoi’s People
Committee. The original completion date was set in 2008 but has been
delayed to Q2/2014. To reach this new adjusted target, land clearance
was expedited and has been handed over to the contractor in August.
Source: Internet
P.3 | Colliers International

6. HO CHI MINH CITY | Q3 2013 | OFFICE MARKET
SUPPLY BY GRADE, Q3 2013
MARKET OVERVIEW
In Q3 2013, the Lim Tower, located at 9-11 Ton Duc Thang Street in
District 1, entered the market. Suggested to be a Grade A building
was 34 upper floors and two basements, comprising of 34,000 sq m
of commercial office space. 60% of the building has already been occupied by Techcombank and Puma.
Landlord of Grade B and C buildings are well as outlying developments
are still offering incentives to entice potential tenants. This has led to
Source: Colliers International
a stronger absorption in Q3 than previous quarters, increasing month
by month because of the limited of supply and slight uptick in demand.
ASKING RENT BY GRADE, Q3 2013
Lessors of Grade A buildings are increasing their rents slowly given
the limited Grade A space available, limited new supply and increased
in demand from premier organisations where location and quality of
service is a major factor.
Average overall market occupancy rates increased to 89.9%, from
88.2% in previous quarter.
MARKET PERFORMANCE
Source: Colliers International
OCCUPANCY RATE BY GRADE, Q3 2013
All three grades’ asking rent declined in Q3, continued their downward
trend. The average asking rent of Grade A decreased nearly to 4%
q-o-q, to US$37.4/ sq m/ month. Overall occupancy rates increased,
slightly to 86.9% from 85.5% in previous quarter with the uptake of
1,610 sq m of space though minor tenants over numerous buildings.
The average asking rents of Grade B also showed a decrease of 6% qo-q, remaining at US$18.8/ sq m/ month. Because most of the Grade
B is located outside the Central Business District (CBD) has a lower
rent than previous quarter, some of them were the lowest price since
Source: Colliers International
VIETCOMBANK TOWER
Q2 2012. However Grade B performed best when occupancy rate was
approximately 91% in this quarter.
Grade C Office asking rents dropped from US$15.6/ sq m/ month to
US$14.1/ sq m/ month, a decrease of 9% q-o-q. Vacancy levels fell by
12.3% compared with the previous quarter.
MARKET OUTLOOK
The demand of the market will be healthy in the foreseeable future due
to a steady increase of Ho Chi Minh City’s demand. New office constructions has been modest with only several new buildings opening
next year. Sunny Tower has showed good progress while Vietinbank
Tower, Vietcombank Tower, and Le Meridien Saigon are expected to
complete in 2014.
Source: Internet
P.4 | Colliers International
From now to the end of the year, expect asking rents to climb slowly.

7. HANOI | Q3 2013 | OFFICE MARKET
SUPPLY BY GRADE, Q3 2013
MARKET OVERVIEW
During Q3 2013, 3 new grade office buildings came online in Western
Hanoi (new CBD), with a total supply of around 45,000 sq m, bringing the
total supply to approximately 1.5 million sq m NFA.
New supply continues to outpace demand, applying a steady downward
pressure on rents. Tenants continued to move out the CBD to higher
quality and less expensive options in outlying districts. Landlords are fight
a losing battle against new supply to retain current tenants as well as attract new ones, yet leading to price and services competition. There is no
Source: Colliers International
GRADE A OFFICE PERFORMANCE
sign of the market floor as prices have continued to decline steadily over
the last two years.
MARKET PERFORMANCE
During Q3 2013 Grade A rents decreased slightly over the same period to
US$32.10/ sq m/ month. Expect rents to fall in Q4 as new incentives and
rent reductions continue to roll out.
The good news is that occupancy has increased slightly 74% up from
72% in Q2. Several Grade A buildings have achieved 90% occupancy and
continue to absorb new tenants with flexible terms and superior building
Source: Colliers International
GRADE B OFFICE PERFORMANCE
design.
The Grade B segment increased rents to US$18/ sq m/ month from
US$17/ sq m/ month and sacrificed occupancy which fell 5% to 68%.
Fierce competition in Western Hanoi is being exacerbated by the new
supply.
MARKET OUTLOOK
Lotte Centre Hanoi had its topping ceremony this quarter which
strongly remind the market of their imminence impact. 45,000 sq m of
grade A office in the area between old and new CBD shall challenging
much greater competition threat to both sides. The building is taking
Source: Colliers International
inquiry from tenants who can be move in beginning Q2 2014.
ESTIMATED FUTURE SUPPLY
Source: Internet
P.5 | Colliers International

8. HO CHI MINH CITY | Q3 2013 | RETAIL MARKET
AVERAGE MARKET PERFORMANCE, Q3 2013
MARKET OVERVIEW
The retail market declined over the quarter with both average asking
rents and occupancy rate dropped slightly. Discounts and sales
promotions have been offered by many commercial centers to boost
sales, however, customers continue to reduce spending amid worries
about recession, unemployment, and high prices. In the central
business district (CBD), an increasing number of vacant kiosks have
not changed landlord rental strategy as high rents are forcing retailers
to consider leaving commercial centers and seek more affordable
Source: Colliers International
locations. According to our Retail Leasing team, tenants prefer high -
MIN - MAX AVERAGE ASKING RENT
street shop houses which offer affordable rental and large space over
the malls in the CBD.
Although purchasing power has weakened due to the slowdown,
HCMC, is sorting to see gains in consumer’s demand. In Q3, hundreds
of convenience stores and food & beverage (F&B) have joined the
retail market and expanded their chain stores such as Starbucks,
KFC, Circle K, Shop & go, Coffe Bean, Burger King. In the middle of
July, the world most famous fast food chain, McDonald’s, has officially
announced their appearance in Vietnam through a franchise to Good
Source: Colliers International
Day Hospitality Company. Their first store will open in Q1 2014.
CANTAVIL PREMIER
EXISTING SUPPLY
Q3 2013
Source: Colliers International
MARKET PERFORMANCE
Overall, the retail market declined slightly in the review
quarter. The average rent of retail market dropped 3% q-o-q
to US$49.24/ sq m/ month. Occupancy rate remained low
and continuous went down, fell q-o-q from 86.2% to 82.2%.
The highest rental was retail podium, nearly US$61.4/ sq
m/ month while the best occupancy was in the department
store segment, staying at 87.3%.
Source: Colliers International
SAIGON AIRPORT PLAZA
OUTLOOK
Although the retail sector has been in decline over the past
two years due to the declining buying power, the market
is still appealing to foreign investors via mergers and
acquisitions.
Alternatives such as F&B, online shopping, mini-supermarkets
and convenience stores with low operating costs have
become popular with consumers.New supply will be came
from retail podiums such as Saigon Airport Plaza, Cantavil
Premier, Times Square, Thao Dien Pearl, and City Garden.
The landlords are going to upgrading and restructuring their
owner building, also offer more policy, incentives contracts
to support the tenants, especially non-CBD landlords.
P.6 | Colliers International
Source: Colliers International

9. HANOI | Q3 2013 | RETAIL MARKET
SUPPLY BY TYPE, Q3 2013
MARKET OVERVIEW
In Q3 2013, Hanoi retail market welcomed the new Vincom Mega Mall
Royal City. The concept is brand new in the Hanoi market is highly
anticipated. Retail space within CBD is showing signs of stagnation as
prices remain high while the luxury and mid end retailers continue to
struggle. On the other hand the market in the outer CBD is growing
strongly as retailers more into the low and middle income areas setting
the stage far a strong rebound in near future.
Source: Colliers International
GRADE A OFFICE PERFORMANCE
MARKET OPERATION
The average market rent was recorded at approximately US$61/ sq m,
a decrease of 7% q-o-q. This drop in price mainly comes from new
space within the old CBD trying to re-launch and offer more competitive pricing to attract retailers.
The launch of Vincom Mega Mall was very successful attracting many
people to the mall. Accessibility and parking are current problems
which should resolve it self as the novelty wears off.
OUTLOOK
Source: Colliers International
AVERAGE RENT BY TYPES
Source: Colliers International
VINCOM MEGA MALL ROYAL CITY
Lotte Mart is re-launching at MIPEC tower Q1 2013 and opening Lotte
Center Hanoi Q2 2014. Their two large shopping centers will stir up
the market and covering a large audience between the Old and New
CBDs. Retail space in both CBDs will face this new challenging business concept from the Korean giant.
Meanwhile on the demand side, purchasing power remain weak due
to the slow economy. However, international retailers are targeting
the rising middle class and helping shape a new trendy lifestyle. We
can expect the retail market recover faster than any other real estate
sector.
Following Vietnam’s agreement to join the WTO, regulations are gradually loosen up, which is creating a better investment environment and
attracting FDI, opening the door for more retailers make their presence
in the next several years.
Source: Colliers International
P.7 | Colliers International

10. HO CHI MINH CITY | Q3 2013 | RESIDENTIAL MARKET
OVERALL MARKET OPERATION, Q3 2013
MARKET OVERVIEW
In Q3, the government released a new policy which discounted value
added tax (VAT) to the sale and lease of commercial apartments with a
floor area of less than 70 sq m, which are sold at a price below VND15
million per sq m, from July 1, 2013 to June 30, 2014. The government also
reviewed a proposal by the Ministry of Construction, which would allow
the foreigners to buy homes in Vietnam.
Approximately 1,700 units were launched in Q3, an increased of 45%
Source: Colliers International
q-o-q. Some of outstanding projects were Sunrise City (North Segment),
ESTIMATED FUTURE SUPPLY
SCG Nguyen Cuu Van, Ehome 3 and Happy Valley. A discount of 10%30% have been common headlined, especially the developer - Novaland
was discounted 50% in Sunrise City for their tower (North), however
the product was reduced someway so the clients should be noted when
tending to buy these kind of apartments. While the another developers
were expected higher price in future so they want to launch their building
later.
Source: Colliers International
MARKET PERFORMANCE
In the primary market, average asking price dropped from US$889/
While in the secondary market, average asking rent went up from
sq m to US$819/ sq m, a slight decrease of 7% q-o-q. In this quarter,
US$962/ sq m to US$1047/ sq m in this quarter. Most of transactions
the market saw an increase in transactions
were apartments in District 2 and District 7, which have affordable
due to discounts
extension of payment terms, and free management fees.
SECONDARY MARKET, Q3 2013
prices
PRIMARY MARKET, Q3 2013
Source: Colliers International
MARKET OUTLOOK
According to the Housing and Real Estate Market Management
Department, in HCMC, inventory of 121 apartment projects
were 14, 816 units. To reduce these inventories, the developers
will need to further reduce prices or convert commercial
apartments to social apartments. Sentiment in the market is
beginning to turn bullish as we are rebounding from the floor.
The authorities will revise law to encourage foreign
investment in the property market, including making it
easier for foreigners to own property. However, foreigners
investors are still hesitant in the face of high taxes and poor
infrastructure
P.8 | Colliers International
HAPPY VALLEY

11. HANOI | Q3 2013 | RESIDENTIAL MARKET
NEWLY-LAUNCHED UNITS, Q3 2013
MARKET OVERVIEW
In Q3 2013, the low income VND 30,000 billion stimulus package has fail
to make any significant impact on the market. Only a small amount of
transactions, that qualified and managed to get the special loan, was recorded by the authority, 350 individuals borrowing only slightly over VND
100 billion. The Hanoi market has shown cautious movement, launching
1900 units, and the average market price remained almost unchanged
Source: Colliers International
from the previous period.
THE PRIMARY MARKET
AVERAGE NEWLY-LAUNCHED PRICE
In Q3 2013, Hoang Thanh Tower opened its model house marking the
return of high end residential for sale. Together with other projects
such as IPH and Royal City, the high end sector is making a return
with positive momentum. It is worthy to note that Hoang Thanh sales
were recorded at more than US$4.000 per sq m. This bodes well for
the high end segment as demand is still out there for projects that
can show a realistic touch and feel for the buyer. With good construction quality and reliable construction progress, buyers would be more
Source: Colliers International
willing to sign contracts - a marked difference from the past where
buyers were purchasing yet-to-built units and expecting handovers
AVERAGE SECONDARY PRICE
several years.
THE SECONDARY MARKET
Secondary market continues to suffer from low liquidity as the fight
between investor and developer continues. Asking prices in Ha Dong
decreased as much as 5% while Long Bien, Hai Ba Trung and Dong
Da were also down by 3 to 4 percent. As developers in the primary
market are reducing the selling price publicly or discreetly, secondSource: Colliers International
HOANG THANH TOWER
ary investors, especially ones who own unfinished units, are being
squeezed. The market is strongly a buyer’s market who have turned
to deal hunting.
OUTLOOK
Following Q2 2013, this quarter provided more light at the end of the
tunnel for the residential market. With prices near bottom, home buyers and long term investors are looking for their deals with cautious
optimism. Secondary market at certain good quality projects showed
a slight increase in prices. Demand for units that are close to completion with reliable construction progress is high as evidenced by actual
transactions. Distinctive developers have differentiated themselves
from others through their progress and capital strength.
P.9 | Colliers International

12. RESEARCH & FORECAST REPORT | Q3 2013 | VIETNAM
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