MARKETVIEW

Vietnam Market, Q4 2017

Edge of Tomorrow:
Strength to Strength
VIETNAM GDP HCMC GDP HANOI GDP VN-INDEX
6.81% y-o-y 8.30% y-o-y 8.48% y-o-y 48.03% y-o-y

Figure 1: Vietnam’s Interest Rates and GDP Growth Rate

25 10

20 8

GDP growth rate (%)

15 6
Interest Rate (%)

10 4

5 2

0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Average CPI (y-o-y) Lending rate Deposit rate GDP Growth Rate (RHS)
Source: Vietnamese General Statistical Office, commercial banks, 2017.

International arrivals to Vietnam in 2017 was

In Q4 2017, Vietnam’s economy grew 7.65% y-o-y.
estimated at 12.9 million, with growth rate of
For the whole year 2017, the economy achieved an
29.1% y-o-y. Tourism continues to be a key focus
impressive growth rate of 6.81% compared to 2016 –
the highest rate observed since 2008. of Vietnam’s economy, which is being leveraged
to grow the vacation property markets in coastal
For 2017, Vietnam received US$21.3 billion from
cities like Da Nang, Nha Trang, Phu Quoc.
newly licensed projects along with US$8.4 billion in
terms of increased capital and US$6.2 billion from
share purchase, totaling US$35.9 billion, an increase As the economy had a stellar performance in
of 44.4% compared to last year. Japan, Korea and 2017, Vietnam’s real estate investment scene
Singapore are top countries with largest share of FDI continues to attract more and more interest from
inflows into Vietnam this year. FDI into real estate
foreign investors and developers across all
accounted for 8.5% of total FDI, ranking third after
sectors, with the presence of Chinese and
manufacturing, electricity production and distribution.
Japanese groups getting more visible.
Export turnover of goods in 2017 grew by 21.1% y-o-
y, and Vietnam attained a trade surplus of US$2.7
Wrapping up 2017, Vietnam’s real estate market
billion amid a synchronised recovery of the global
economy. VN Index reached a 10-year high by the is entering 2018 with a positive sentiment,
end of 2017, inflation was at 3.53%, while GDP per despite some skepticisms about oversupply in the
capita reached US$2,385 (an increase of 7.7% y-o-y). upscale residential sector, especially on
However, some concerns were raised regarding secondary and rental markets. This will be an
productivity of the labor force, especially in
important year to gauge the direction of the
comparison with neighboring countries.
market for the mid term.

Q4 2017 CBRE Research © 2017 CBRE, Inc. | 1

M A R K E T V I E W HANOI OFFICE

S L O WER S U P P L Y G R O W TH I N 2 0 1 7 Figure 2: Asking Rent, Office

30
Year 2017 ended with many positive signals in
Hanoi office market. Supply continued to
20

US$ psm pm
increase in Grade B’s stock with 67,500 sm from
six new projects. Accordingly, accumulated
supply of Grade A and B has increased by 5% y-o- 10
y, lower than the average growth of last 5-year of
10% p.a. 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
I M P R OVI NG M A R K ET P E R F ORMA NC E 2015 2016 2017
Grade A Grade B
The highlight of 2017 is an increase in asking Average office rents on net leasable area, excluding VAT and Service charge.
rents in both Grade A and B which is seen for the Source: CBRE Research, Q4 2017.
first time in the last five years. As at the end of
2017, asking rents of Grade A stayed at US$24.8 Figure 3: Vacancy Rate, Office
psm pm (net of VAT and service charges), up by
25%
9.5% y-o-y. Meanwhile, rents of Grade B went up
slightly by 0.4% y-o-y, reaching US$13.6 psm pm. Vacancy Rate (%) 20%

15%
In terms of vacancy rates, Grade A’s experienced
a significant improvement given a year of no new 10%
supply. Vacancy rates of Grade A reached 8.9%, 5%
down 6.8 ppts y-o-y. For Grade B, given the
0%
continuous supply since late of 2016, vacancy Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
rates increased by 1.2 ppts to stay at 17.5%. This 2015 2016 2017
is a record low for Grade A and Grade B’s vacancy Grade A Grade B
over the last five years
Source: CBRE Research, Q4 2017.

Demand-wise, net absorption was around 75,000

sm in 2017. Net absorption was mostly Figure 4: Net Absorption, Office
contributed by buildings in non-CBD locations. 50,000
2017 witnessed many transactions of large
40,000
leasing area.
Net Absorption (NLA sm)

30,000
In 2018, positive rental growth is expected in 20,000
both Grade A and B, especially in Grade A on the
back of no new supply. In terms of demand, 10,000
apart from traditional sectors such as 0
banking/insurance, manufacturing and IT, co- Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
working space is expected to be a potential 2015 2016 2017
source of demand, especially in locations of Grade A Grade B
competitive rents. Source: CBRE Research, Q4 2017.

Q4 2017 CBRE Research © 2017 CBRE, Inc. | 2

 M A R K E T V I E W HANOI RETAIL

S T A B L E Y E A R W E L C OMED L O N G A W A I T ED Figure 5: Existing Supply, Retail

I N T ER NATI ONA L B R A N D S
1,000,000

Total supply, units

Hanoi retail market ended 2017 with an active 800,000

year in term of supply with two new projects 600,000

coming online in the middle of the year, adding 400,000
36,000 sm to the market, increasing total supply
200,000
to 790,000 sqm.
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Meanwhile, in term of retailers, the last three
months of 2017 witnessed the entrance of three 2015 2016 2017

long awaited international brands into Hanoi CBD Non - CBD

market. Among those, two were international fast Average retail rents of first and ground floor, excluding VAT and Service
fashion brands while the other was F&B, charge.
Source: CBRE Research, Q4 2017.
reflecting a focus on these categories in recent
quarters.
Figure 6: Average Ground and First Floor Rent, Retail
$120
Regarding performance, rental and vacancy rates
$100
in the last quarter of the year remained stable.
$80
US$ psm pm
Minor changes were recorded, of 0.06% decrease
in average rental rates, and 0.03 ppts decrease in $60

vacancy rates compared to Q3 2017. On a y-o-y $40

basis, average asking rent improved at a 1.15% $20
growth compared to 2016. Meanwhile, average $0
occupancy rate dropped 2.53 ppts due to Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
increased vacancy in certain shopping centers in 15 16 17
non-CBD locations despite improvement of CBD CBD Non-CBD
malls.
Source: CBRE Research, Q4 2017.

V I B R A NT Y E A R A H E AD F O R H A N OI R E T A IL
M A R K ET Figure 7: Net Absorption and Vacancy Rate, Retail
160,000 35%
2018 promises an active year for the retail market
as a total of 157,000 sm will be added from eight
Net Absorption (NLA sm)

80,000 15%
Vacancy Rate (%)

projects in the pipeline. If completed on time,

this will be the largest number of projects to be
added on an annual basis. Moreover, most of 0 -5%
these projects are located in quickly developing
area, both in term of residential and commercial
aspects, making it potentially attractive toward -80,000 -25%
2015 2016 2017
both retailers and consumers. Once completed,
these future projects could create a new retail Net absorption Vacancy rate
zone in Hanoi. Source: CBRE Research, Q4 2017.

Q4 2017 CBRE Research © 2017 CBRE, Inc. | 3

 M A R K E T V I E W HANOI CONDOMINIUM

N E W L A U N C H S E T A R E C O RD H I G H I N 2 0 1 7 Figure 8: Launch Supply, Condominium

12,000
Year 2017 ended with a busy quarter in
10,000
apartment-for-sale market. There were around
8,000
9,500 units launched in the last quarter of the

Units
6,000
year making total new launch in 2017 to reach
4,000
more than 35,000 units, up by 16% y-o-y. The
amount of new launch has set a record high in 2,000

Hanoi in the last five years. Newly launched 0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
projects were in different districts in Hanoi. In
particular, along with the development of 2015 2016 2017
infrastructure and decentralization, Luxury High-end Mid-end Affordable
condominium projects were launched in Dong
Anh district for the first time. By segment, Mid- Source: CBRE Research, Q4 2017.
end and Affordable segments continued to
dominate the market, accounting for 80% of Figure 9: Sold unit, Condominium
total new supply in 2017.
25,000

In terms of sales performance, 23,000 units were 20,000

recorded sold during the year, up by 12% y-o-y. It
is worth mentioning that several projects in non- 15,000
Units

prime locations achieved strong sales

10,000
performance (higher than 70% during the first
launched quarter) due to reasonable 5,000
infrastructure connections, and sufficient
0
facilities and amenities.
2015 2016 2017
Q1 Q2 Q3 Q4
In terms of pricing, the combination of Source: CBRE Research, Q4 2017.
continuous supply and shift towards mid-end
and affordable segments have kept primary
pricing to remain relatively flat. End of 2017, Figure 10: Primary prices, Condominium
average primary pricing was recorded at 4,000
US$1,344 psm, down by 2.4% y-o-y.
3,000
US$ psm

In the next few years, sustainable economic 2,000

fundamentals will continue to be the firm
1,000
foundation for residential and apartment-for-sale
developments. As market further develops and -
future supply to come from various locations, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
developers will be under pressure to 2015 2016 2017
professionalize sales team and improve quality of
Luxury High-end Mid-end Affordable
marketing activities, in order to compete
effectively and increase sales performance Source: CBRE Research, Q4 2017.

Q4 2017 CBRE Research © 2017 CBRE, Inc. | 4

 M A R K E T V I E W HANOI LANDED PROPERTY

T H E W E S T A N D T H E S O U TH L E D T H E M A R K ET Figure 11: New Launches, Landed Property

FOR NEW SUPPLY
1,000

As of Q4 2017, 444 new units have been added to 800

600

Units
landed property market in Hanoi. About 73% of
new supply in Q4 were in the form of terraced 400
houses. Of four new projects launched in the
200
review quarter, two projects are located in Long
0
Bien District, namely 319 Bo De and Khai Son
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Hill. Two other projects include Lakeside
2015 2016 2017
Splendora (BT5) (Hoai Duc District) and Athena
Fulland Dai Kim (Hoang Mai District). The total Villa Terraced Shophouse
number of new launched units in 2017 stood at Source: CBRE Research, Q4 2017.
4,178, including villas, terraced houses and
shophouses. The West and the South led the
market for new supply, accounting for 72% of Figure 12: Average Secondary Price of Completed Units, Landed
total new launched units in 2017. Property
5,000 15%
S T A B L E P R I M ARY A N D S E C OND AR Y P R I C E
4,000 9%

Change (%)
3,000 3%
US$/ sm

The number of units sold recorded in Q4 2017

reached 1,142 units, increasing by 48% q-o-q but 2,000 -3%
decreasing by 71% y-o-y, thanks to a moderate 1,000 -9%
number of supply added in Q3 2017. For the year 0 -15%
ending 2017, Hanoi’s market recorded 4,800 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
units sold, majority of which were from the West 2015 2016 2017
(64%), followed by the East of 20% of total Market average price Changes q-o-q
number.
Source: CBRE Research, Q4 2017.
The average primary pricing for the year ending
Figure 13: Secondary Price of Completed Units, Landed Property
2017 stood at USD3,600 per sqm on land size,
down slightly by 2% from previous quarter’s 10,000
level. At the same time, the average secondary 8,000
6,000
US$ psm

pricing reached USD3,778 per sqm on land size,

up by 3.5% y-o-y. Districts such as Gia Lam and 4,000
Long Bien as well as Hung Yen saw upward 2,000
trends in secondary prices, increasing by around 0
5% q-o-q on average The improvement in Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
infrastructure in the these districts enable 2015 2016 2017
residents to easily commute within the radius of Cau Giay Ha Dong Tay Ho
10 km, creating an opportunity for the Hung Yen Gia Lam Long Bien
development of townships in the surrounding
areas. Source: CBRE Research, Q4 2017.

Q4 2017 CBRE Research © 2017 CBRE, Inc. | 5

 M A R K E T V I E W HANOI SERVICED APARTMENT

LARGEST NEW SUPPLY SINCE 2012 WITH Figure 14 : Existing Supply, Serviced Apartment
D O M I NANC E O F I N T E RNATI ONA L O P E R ATORS
4,000
3,500
Hanoi Serviced apartment market in 2017 3,000

No. of units
welcomed two new projects with total supply 2,500
reached 3,649 units, increased 12% y-o-y. This is 2,000
1,500
the largest increase in term of total supply and
1,000
Grade A since 2012. Both of the new projects this 500
year were managed by international operators, 0
showing increasing interest of these players Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

toward Hanoi market. 2015 2016 2017

This trend is expected to continue in the next Grade A Grade B

three years when 7 out of 9 future projects are
confirmed to be operated by international Source: CBRE Research, Q4 2017.
players. The market is expected to be more
Figure 15: Asking Rent, Serviced Apartment
competitive with higher demand on quality and
35
management while at the same time providing

US$ psm per month

more options for tenants. 30

P R E S S UR E O N O C C U PA NC Y R A T E, 25
I N C R EAS I NG L Y C O M P ETI TI VE M A R K ET
20

Regarding performance, the last quarter of 2017 15

witnessed an increase in vacancy rate, 2.2 ppts q- Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
o-q to 18.1%. Grade B contributed with a raise of 2015 2016 2017
3.0 ppts q-o-q while Grade A stood at 16.6%,
Grade A Grade B Market average
equivalent to 1.8 ppts increase from the previous
quarter. Source: CBRE Research, Q4 2017.

Such pressure by occupancy rate caused a decline

in rental rates of some projects while other well-
Figure 16: Market Performance, Serviced Apartment
performed ones with high demand increased 4,000 100%
US$ per unit per month

their rates. Overall, the average market rent rose

Occupancy Rate (%)
3,000 90%
slightly 0.1% q-o-q and 2.6% y-o-y reached
US$29.3 per sm per month. Such growth mostly 2,000 80%
came from Grade B with 0.3% increase q-o-q or 1,000 70%
0.7% y-o-y. Meanwhile, Grade A’s rental rate
0 60%
stood at US$ 32.5 per sm per month, grew 0.1%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
q-o-q and 3% y-o-y.
2015 2016 2017

Average asking rent RevPAR Occupancy rate, %

Source: CBRE Research, Q4 2017.

Q4 2017 CBRE Research © 2017 CBRE, Inc. | 6

 M A R K E T V I E W HANOI

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+84 4 2220 0220 194 Tran Quang Khai, Hoan Kiem District,
An.nguyen@cbre.com Hanoi, Vietnam

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Fl. 3, Indochina Riverside Towers,
74 Bach Dang, Hai Chau District,
Da Nang City, Vietnam

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