VNRE - According to a report released by DTZ Research, the office sector in Ho Chi Minh City (HCMC) remains a challenge going into 2011.
Rents and occupancy rates, which fell through 2010, have continued to see downward pressure during Q1 2011. Occupancy rates fell from 81% to 79.8% by the end of the quarter, while average rental rates declined by approximately 6%. Grade A property has seen a particularly challenging quarter as rents for this accommodation fell by 6.25% quarter-on-quarter (QOQ) from USD36.00 to USD33.75 per sq m per month. Grade A occupancy rates ended the quarter at approximately 63%.
The current stock in HCMC rose to approximately 1.18 million sq m (NLA), with approximately 42,000 sq m completed in 2010. Approximately 245,000 sq m (NLA) of new supply is forecast for the remainder of 2011.
Trang Le, Head of DTZ Occupier Services commented, “So far 2011 has seen a continuation of challenging conditions in the office sector. There is still a large amount of empty space across HCMC, which is creating a favourable market for tenants. With an increase in choice of accommodation, tenants are demanding more value for their money. However there is still some demand in the market, so it is essential for landlords to make their buildings more attractive to tenants by differentiating themselves in terms of quality, pricing and incentives”.
CBD occupancy rates remain high while rents show slight increase in retail sector
Retail sales in consumer goods and services continue to show improvement with Q1 2011 consumer sales increasing on a year-on-year (YOY) basis by 22.6% against the same period in 2010.
Occupancy rates remain close to full occupancy in the CBD, where retail space is limited compared to demand. Outside the CBD, average occupancy rates fell slightly by around 1 percentage-point to approximately 91.5% across all types of retail accommodation, as retailers continued to show their preference for CBD locations. Overall occupancy across HCMC rose by 1 percentage-point to 94.5%.
As a result of high demand for CBD retail space, average retail rents in the CBD rose in the quarter to between USD100 and USD125 per sq m per month.
The current stock contains 38 developments providing approximately 310,000 sq m (NLA) of accommodation. In terms of future supply, if all projects currently in the development pipeline are completed according to schedule, approximately 530,000 sq m (NLA) of new supply will be available before the end of 2013.
KP Singh, General Director of DTZ Vietnam commented, “At present supply is still limited in Ho Chi Minh City, particularly compared to the high demand in prime locations with large amounts of footfall. We are therefore positive about the upcoming prospects for the retail sector in these areas. Outside the CBD there are higher vacancy rates, and rents have fallen slightly in the first three months of 2011. With much of the forecast development pipeline being in outer districts, successful developments in these area will have to be carefully planned and implemented, with issues such as target markets and leasing strategies being of utmost importance in creating a successful retail development.”
High finance rates and restrictions on credit continue to slow demand in the condominium sector
In general the residential market has remained much the same as the previous quarter. Demand for condominiums continues to be subdued with high finance rates, high inflation and potential for further dong devaluations causing many potential purchasers to adopt a wait-and-see attitude.
Nevertheless, asking prices remained stable in the first quarter. Prices in Q1 2011 for affordable condominiums ranged from USD500 to USD1,000 per sq m and ranged between USD1,000 and USD1,700 per sq m for mid-ranged units. The majority of high-end asking prices range from USD1,700 and USD2,500 per sq m, although the highest quality properties in prime locations can have asking prices of above USD4,000 per sq m.
At the end of Q1 2011 the total supply of condominiums in HCMC is estimated to be approximately 41,500 units with only around 300 units completed in the quarter.
In terms of sector outlook, demand is expected to be slow for much of 2011 with investors continuing to remain on the sidelines while interest rates remain high. Given this we expect affordable housing projects to continue to lead the way for 2011 with demand largely from end-users.
Lu Thanh Tu, Head of DTZ’s Residential Sales and Marketing commented, “The condominium market continues to suffer in Q1 2011 as a result of high finance rates and credit restrictions which have kept speculators on the sidelines. However if projects are well marketed and have strong differentiating factors and branding then it is still possible to sell many units.”
Source: DTZ Vietnam
Rents and occupancy rates, which fell through 2010, have continued to see downward pressure during Q1 2011. Occupancy rates fell from 81% to 79.8% by the end of the quarter, while average rental rates declined by approximately 6%. Grade A property has seen a particularly challenging quarter as rents for this accommodation fell by 6.25% quarter-on-quarter (QOQ) from USD36.00 to USD33.75 per sq m per month. Grade A occupancy rates ended the quarter at approximately 63%.The current stock in HCMC rose to approximately 1.18 million sq m (NLA), with approximately 42,000 sq m completed in 2010. Approximately 245,000 sq m (NLA) of new supply is forecast for the remainder of 2011.
Trang Le, Head of DTZ Occupier Services commented, “So far 2011 has seen a continuation of challenging conditions in the office sector. There is still a large amount of empty space across HCMC, which is creating a favourable market for tenants. With an increase in choice of accommodation, tenants are demanding more value for their money. However there is still some demand in the market, so it is essential for landlords to make their buildings more attractive to tenants by differentiating themselves in terms of quality, pricing and incentives”.
CBD occupancy rates remain high while rents show slight increase in retail sector
Retail sales in consumer goods and services continue to show improvement with Q1 2011 consumer sales increasing on a year-on-year (YOY) basis by 22.6% against the same period in 2010.
Occupancy rates remain close to full occupancy in the CBD, where retail space is limited compared to demand. Outside the CBD, average occupancy rates fell slightly by around 1 percentage-point to approximately 91.5% across all types of retail accommodation, as retailers continued to show their preference for CBD locations. Overall occupancy across HCMC rose by 1 percentage-point to 94.5%.
As a result of high demand for CBD retail space, average retail rents in the CBD rose in the quarter to between USD100 and USD125 per sq m per month.
The current stock contains 38 developments providing approximately 310,000 sq m (NLA) of accommodation. In terms of future supply, if all projects currently in the development pipeline are completed according to schedule, approximately 530,000 sq m (NLA) of new supply will be available before the end of 2013.
KP Singh, General Director of DTZ Vietnam commented, “At present supply is still limited in Ho Chi Minh City, particularly compared to the high demand in prime locations with large amounts of footfall. We are therefore positive about the upcoming prospects for the retail sector in these areas. Outside the CBD there are higher vacancy rates, and rents have fallen slightly in the first three months of 2011. With much of the forecast development pipeline being in outer districts, successful developments in these area will have to be carefully planned and implemented, with issues such as target markets and leasing strategies being of utmost importance in creating a successful retail development.”
High finance rates and restrictions on credit continue to slow demand in the condominium sector
In general the residential market has remained much the same as the previous quarter. Demand for condominiums continues to be subdued with high finance rates, high inflation and potential for further dong devaluations causing many potential purchasers to adopt a wait-and-see attitude.
Nevertheless, asking prices remained stable in the first quarter. Prices in Q1 2011 for affordable condominiums ranged from USD500 to USD1,000 per sq m and ranged between USD1,000 and USD1,700 per sq m for mid-ranged units. The majority of high-end asking prices range from USD1,700 and USD2,500 per sq m, although the highest quality properties in prime locations can have asking prices of above USD4,000 per sq m.
At the end of Q1 2011 the total supply of condominiums in HCMC is estimated to be approximately 41,500 units with only around 300 units completed in the quarter.
In terms of sector outlook, demand is expected to be slow for much of 2011 with investors continuing to remain on the sidelines while interest rates remain high. Given this we expect affordable housing projects to continue to lead the way for 2011 with demand largely from end-users.
Lu Thanh Tu, Head of DTZ’s Residential Sales and Marketing commented, “The condominium market continues to suffer in Q1 2011 as a result of high finance rates and credit restrictions which have kept speculators on the sidelines. However if projects are well marketed and have strong differentiating factors and branding then it is still possible to sell many units.”
Source: DTZ Vietnam
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