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CBRE RELEASES Q3 2020 QUARTERLY REPORT HIGHLIGHTS
 

Hanoi Market

Hanoi – October 7th, 2020 As the second wave of COVID-19 extended its negative impact on the global economy, Vietnam’s economy was heavily affected with the lowest 9M growth rate over the last 10 years, at 2.12%. However, Vietnam is still amongst a selected few economy with positive growth.

 

In 9M 2020, Vietnam’s export was recorded at US$202.9 billion, up by 4.2% compared to the same period last year. Main exported products include electronics goods, garments, machine and equipment. In term of trading partners, the United States continues to be the market with US$54.8 billion, up by 22.9% y-o-y. China and EU are the next two biggest export partners with total export value of US$31.9 billion and US$26 billion respectively.

 

Total registered foreign direct investment in Vietnam in 8M 2020 reached US$ 19.6 billion, down by 13.7% y-o-y. Manufacturing and assembling industry continued to be the most attractive industry with US$9.3 billion, accounted for 47.7% total registered FDI. Production and distribution of electricity, gas, water, and air-conditioning ranked the second place with US$4 billion, equivalent to 20.6% total registered FDI. In term of origin, Singapore, Korea and China are the three biggest investment sources, with 33%, 15% and 9% of total registered capital respectively.

 

Vietnam’s hospitality market continued to be severely affected by the second wave of COVID-19. In September 2020, Vietnam reopened international flights to six countries (Korea, Japan, China, Taiwan, Laos and Cambodia). However, these flights are still not available for tourists. As a result, in Q3 2020, Vietnam only welcomed 44,000 international arrivals, mainly foreign experts and technicians working on projects in Vietnam.

 

 

Condominium

 

In Q3 2020, there were approximately 3,500 units launched in Hanoi leading to a total new launch during the first nine month of 2020 of around 10,700 units – down 61% y-o-y. In terms of segment, there were only mid-end and affordable products launched in Q3 2020 with relatively comparable shares to total new launch of 51% and 49% respectively. Most of projects launched during this quarter are small to medium projects located outside Ring Road no. 3.

 

Given the lower new supply volume in Q3 2020, the sold units have exceeded the new launch. Although there were some delays in sales and marketing activities due to second wave of Covid-19 in late July and early August, there were approximately 4,200 units sold during the quarter, 20% higher than the new launch volume.

 

Selling prices in the primary market in Q3 2020 averaged US$1,325 per sqm (net of VAT and maintenance fee), down by 4% y-o-y due to higher share of new launch from affordable segment.

 

 

Notes on CBRE condominium ranking criteria:

  • Luxury: projects that have primary prices (net of VAT and maintenance fee) over US$4,000 psm
  • High-end: projects that have primary prices (net of VAT and maintenance fee) from US$2,000 psm to US$4,000 psm
  • Mid-end: projects that have primary prices (net of VAT and maintenance fee) from US$1,000 psm to US$2,000 psm
  • Affordable: projects that have primary prices (net of VAT and maintenance fee) under US$1,000 psm

Moving forwards, the level of new launch is expected to hover at around 14,000 - 16,000 units in 2020, allowing sales absorption to catch up. The primary pricing is forecasted to remain flat in Q4 2020 since new supply is heavily dominated by mid-end segment and higher competition in this segment. Ms. An Nguyen – Director of Hanoi Branch, CBRE Vietnam noted “The Hanoi condominium market has been heavily dominated by local, Hanoi-based developers. We expect this to change in the near future, as an increasing number of foreign developers, and Vietnamese Southern based developers are expected to invest in new projects in Hanoi”.

 

Landed property

 

Being affected by the second wave of Covid-19, Landed Property market recorded only 45 new units launched in the third quarter. As of the first 9 months of 2020, the number of newly launched units is only 326 units, down 92% compared with last year. Because of the limited new supply and positive demand, the sale performance is still positive, recording at 570 units, approximately 30% higher than the number of new launches in the period.

 

 

 

In terms of market performance, due to low new supply, the market paid more attention to the  existing projects. The growth in the secondary prices for villas and terraced houses was illustrated at 2.0% and 7.2% respectively compared to the last year. The secondary prices continued to increase in the developed locations such as Thanh Xuan, Bac Tu Liem, Nam Tu Liem, Cau Giay, Tay Ho. Besides, these areas also witnessed the completion of infrastructure projects and amenities recently.

 

It is expected that the new supply for landed property market will be limited to 500 - 600 units in the whole year 2020. In the following years, the market is expected to further expand to new areas such as Dan Phuong, Dong Anh or Van Giang (Hung Yen).

 

Office

In Q3 2020, Hanoi office market welcomed around 93,000 sqm NLA of new office space, with the opening of Capital Place. With this project, total supply of Grade A office increased by 21%, surpassing 520,000 sqm NLA. Total office space of both grades in Hanoi reached 1,468,000 sqm NLA.

The performance of Hanoi office market continued to struggle from second resurgence of COVID-19, as certain tenants further contracted their office space. Total net absorption of Hanoi office in Q3 2020 market was around (6,500) sqm.

 

 

Vacancy rates of Grade A office in Hanoi surged to 24.1% due to the combined impact of COVID-19 and major new supply, up by 16.5 ppts q-o-q and 16.2 ppts y-o-y. Vacancy rates of Grade B projects also raised to 11.5% as at Q3 2020, up by 0.5 ppts q-o-q and 2.4 ppts y-o-y.

In term of asking rents, the market observed opposite movements in Grade A’s and Grade B’s buildings. While asking rents of Grade B dropped by 2.7% q-o-q, to US$13.8/sqm/month, asking rent of Grade A increased by 2.2% q-o-q, reaching US$26.7/sqm/month, attributed to the premium asking rent of the new Grade A project.

 

 

 

 

Hanoi office market is expected to welcome large future pipeline, with around more than 50,000 sqm NLA in Q4 2020 and more than 220,000 sqm NLA in 2021.

 

In 9M 2020, traditional sectors continued to be the main demand factor. Amongst transactions recorded in 9M 2020, Banking/Finance/Insurance, Manufacturing, Services and IT/Tech contributed two third of total transacted space. Flexible workspace providers are postponing their expansion plan and focus on existing venues. Major players reported a healthy vacancy rate of above 70% in stabilized venues.

 

Retail

 

In the third quarter, despite the effect of the return of Covid-19 in late July, Vietnam still quickly managed to control the pandemic. Therefore, the total sales of retail and consumption in the third quarter still grew slightly by 0.7% for the first 9 months of 2020, though significantly lower than the increase of 12% to 14% in the previous years. Retail sales of Goods is the fastest group to recover with the revenue accounting for over 76% of the industry's revenue. The signs of recovery were not really clear in the group of travel, accommodation and food, although Vietnam has taken many measures to stimulate domestic tourism demand and re-open flight routes.

 

The retail businesses still face many problems inside and outside the business related to revenue, consumer behavior, capital shortages and supply chain maintenance. At the same time, the market continues to witness a change in consumer trends by focusing on savings, instead of spending on goods. However, after the epidemic was under control, according to statistics from Google, the number of visitors to shopping malls or retail spaces also started to increase and showed signs of recovery, although this level has yet to return to that before Covid-19. One of the factors contributing to this increase is that certain major foreign brands continue to open new stores during the pandemic period such as Uniqlo, MLB ... attracting local shoppers.

 

 

In terms of supply, the Hanoi market did not record any new projects coming into operation in the first 9 months of 2020. Retail NLA remained unchanged at more than one million m2 NLA.

 

In Q3, the market witnessed some fluctuations in asking rents and vacancy rates due to the impact of pandemic. Asking rents on the ground floor and the first floor in the CBD area recorded a decrease of 0.13% q-o-q, reaching US$98.62/sqm/month. Despite the advantage of location and limited new supply, the vacancy rate in the CBD jumped to 11.05%, up 10.33 ppts q-o-q and 9.71% y-o-y. This is the first quarter in 8 years when shopping malls in the CBD sees such a high vacancy rate.  Rents on the first floor, however, remained unchanged as vacant space was mostly on the upper floors of the shopping centers.

 

Rents in non-CBD locations also recorded a drop of 1.5% y-o-y and 0.78% q-o-q, averaging US$24.53/sqm/month, down 1.5% y-o-y and 0.78% q-o-q. Vacancy rate remained at a high level and tended to increase, reaching 11.15%, up 1.37 ppts q-o-q and 2.93 ppts y-o-y.

 

As most tenants experienced challenges during this tough time, landlords have shown different reactions in their rental policies: many landlords offer financial support such as rent free periods, reduced rents, or rental rebates, while certain landlords, including some shophouse owners, have been reluctant to offer such programs, rather leaving the units vacant. As such, it is not uncommon to see ongoing vacant, closed shops on major streets of Hanoi, more than six months into the outbreak of Covid-19 to Hanoi.

 

The final quarter of 2020 expects to welcome 54,000 sqm NLA of retail space opening in Hanoi. Beyond 2020, a total of 300,000sqm of known Retail projects are expected to enter Hanoi market. While this shows that Hanoi retail real estate has much to offer, thanks to young demographics and rising income, retail landlords more than ever are required to provide flexibility in terms of sales channels and health and safety measures.

 

Northern Industrial Real Estate Market

 

As at Q3 2020, total land for industrial parks in 5 Northern key industrial cities and provinces, including Hanoi, Bac Ninh, Hung Yen, Hai Duong and Hai Phong was 13,800 ha, of with 9,600 ha of industrial land for lease. The average occupancy rate of these industrial parks was also at a healthy level of 78%. In particular, industrial parks in Hanoi, Hai Duong and Bac Ninh have achieved an average occupancy rate of around 90%. The majority of available industrial land in these key industrial provinces are now in Hai Phong and Hung Yen.

 

 

 

Due to the production movement from China as well as EVFTA, demand for industrial land is increasing across Vietnam. CBRE recorded that the asking rent in in some industrial parks in Hai Phong, Bac Ninh and Hai Duong increased from 20% to 30% y-o-y.

 

 

Performance of ready-built factory and warehouse market remained stable y-o-y due to due to large supply in 2019 and 9M 2020 as well as delayed leasing activity from travel restriction. The strong growth of e-commerce and logistics companies since the outbreak of COVID-19 created a demand for storage space and distribution networks. As a result, the need to find land banks for developing logistics facilities increased significantly. Some specific types of products such as temperature-controlled storage spaces and high-rise warehouse are expected to emerge to meet the demand from fresh food distribution and create larger storage space for e-commerce companies in prime location.

 

 

 

In 9M 2020, CBRE recorded the entrance of major tenants in electronics industry, including a cell phone manufacturing in an industrial park in Bac Ninh (100ha) and Pegatron in Deep C Hai Phong 2 IP. The relocation of supply chain is expected to be the main demand driver in the coming time. With limited industrial land and high asking rent in existing industrial hubs, tenants and investors might seek for alternative options in further areas. Developers will also compete for anchor tenants by applying modern technology in operating facilities, as well as providing a full range of services such as legal and human resources to support tenants during project implementation.

 

THE END

 

© 2016, CBRE, Group Inc. CBRE Limited confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.