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CBRE PREDICT DANANG SUSTAINED GROWTH OVER THE COMING YEARS


IMPROVED AIR INFRASTRUCTURE SEES DANANG CONFIRM ITSELF AS A REGIONALLY IMPORTANT AND GROWING TOURISM DESTINATION – CBRE PREDICT SUSTAINED GROWTH OVER THE COMING YEARS

 

Da Nang, November 18, 2013

 

In what has been another difficult year for the Vietnamese real estate market, Da Nang has yet again managed to confirm its status as one of the unsung heros of the slowly improving economy and property market – most notably with the ever improving performance at the beachfront hotel and resort cluster.

 

The new international airport terminal, inaugurated in December, 2011, has seen an increasing amount of international visitors come to Da Nang. It is immediately apparent that visitor numbers for 2013 will again improve on those witnessed in 2012, comparing the first nine months of the year on a like for like basis, arrivals to Da Nang improved by 17.5%. The growth in arrivals was from both domestic and international visitors, creating a varied demand within the hospitality sector. CBRE were keen to highlight the rising number of scheduled flights to the new international terminal, currently around 50 per week with more likely to be introduced by the end of the year, providing sustainability in the arrivals expected to Da Nang and supplementing the almost 300 domestic flights.

 

Commenting on the significance of the new terminal, Ms Thao Le, Chief Representative for CBRE in Da Nang highlighted, “The city has seen tremendous investment into its infrastructure over the past few years. The airport is the most obvious example, but we must also note the roads and bridges which facilitate smooth travel around the city and to the coastal areas for visitors, be they tourists or on business. The city is one of the most user-friendly in Vietnam and the improved infrastructure and access is undoubtedly improving performance of the hospitality in some important sectors”.

 

CBRE were keen to highlight the improved occupancy rates that have been witnessed in 2013, and the notable jump in the achievable daily rate of 5 star hotels – highlighting the symmetry between infrastructure and real estate performance. Performing particularly well have been the beachfront properties – these properties have proved particularly attractive to Chinese tourists who have been attracted by the gaming facilities at the Crown International Casino and the two championship golf courses, boutique spa properties have also proved very popular, including with guests from Japan and Europe.

 

Commenting on the improving market, Ms Le said, “It is obvious that Da Nang should see growth in its tourism sector and improving performance for the leading hoteliers. Vietnam is relatively unexplored in comparison with the majority of its regional neighbours – we have a wealth of history and natural environments for guests to explore, now with the improved infrastructure, we expect tourism arrivals to Da Nang, and elsewhere in the country to see sustained long-term growth over the coming ten years”.

 

Commenting further on the market, Adam Bury, Associate Director of Capital Markets for CBRE in Vietnam noted, “We have seen a significant investment into the real estate market in Da Nang over the past five to seven years, as we move out of the first cycle of investment it is pleasing to see that there are a number of properties which are generating stable and growing incomes for their owners. ADR’s for five star beachfront properties in Da Nang are at record high, with the sub-sector showing higher rates than the average for five star hotels in HCMC and Hanoi. From small boutique properties to large resorts operated by international hotel groups, success and improving performance has been witnessed along Da Nang’s coast which bodes well for future investment and development into Da Nang”.

 

Mr Bury went on to conclude “Da Nang has proved that it can generate returns for investors, it has proved it has a wealth of experiences to offers visitors and thus we are confident that there will be further development in the Da Nang hospitality sector. The area is becoming better known on the regional tourist trail but still has much potential for expansion and we believe that there will be a number of new international investors who enter Da Nang in the next 18 months to further advance the market”.

 

Turning to the commercial sector, CBRE noted that the office leasing market had remained subdued through much of 2013. On a y-o-y basis vacancy had decreased across all sectors during the year though this had been at the expense of falling rents in the Grade B and C sectors. The Grade A market had however managed to maintain rentals at a stable level on both a q-o-q and y-o-y basis. Looking towards the end of the year and into 2014 Ms Le commented, “We expect the Da Nang office leasing sector to remain a tenants market, particularly for Vietnamese occupiers looking for Grade B or C space. There remains vacancy in the market and new supply is nearing completion. The Grade A market will prove more difficult for tenants however given the limited supply in this sector – here we do not expect to see any softening in rentals”.

 

Finally when looking to the residential market, CBRE noted that the trends evident in HCMC and Hanoi were also being witnessed in Da Nang. Sales velocities have slowly been increasing, with the projects proving to be the most successful being those which are nearly or already completed, or those being developed by groups with successful track records. Ms Le commented, “Buyers in Vietnam are in search of security at the moment, be they investors or owner occupiers. If investing into residential real estate buyers want to see certainty that the product will be delivered on time and to the specifications promised”.

 

Prices in the residential market had remained relatively flat, with minor decreases of 2 – 5% on a y-o-y basis being evident, the discount in pricing was typically reflective of developers offering incentive packages as oppose to headline reductions in asking prices”.

END