Home   »   Press Release   »   CBRE Releases Q4 2020 Quarterly Report Highlights
CBRE Releases Q4 2020 Quarterly Report Highlights
 

Hanoi – January 7th, 2021

 

Condominium

In 2020, there were approximately 18,000 units launched in Hanoi leading to a totally new launch down 52% y-o-y. This is the lowest volume of annual new supply since 2015 when the market strongly recovered. Noticeably, the new launch supply bounced back in Q4 after a relatively quiet first nine months of 2020 with more than 7,200 units, similar to pre-Covid19’s quarterly launch level. In terms of location, the new supply from the East surpassed other clusters for the first time making up 44% of 2020’s total new launch. The supply from this cluster mostly came from mega townships such as Vinhomes Ocean Park and EcoPark.

 

In terms of market performance, there were 18,500 units sold during 2020, exceeding the new launch. Local end-users are a major source of demand amid suspended international flights disrupted sales to foreign buyers.

 

 

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

Selling prices in the primary market in Q4 2020 averaged US$1,412 per sqm (net of VAT and maintenance fee), up by 3% y-o-y. It is noted that the very first high-end projects were introduced in locations such as Gia Lam, Long Bien during this year setting new pricing levels for the East. In addition, the latest projects launched in townships across Hanoi also asked for higher pricing levels than previously launched projects at the same communities relying on their completion of amenities and bettered connectivity. Those factors have contributed to positive pricing growth in Hanoi during the year 2020.

 

Moving forwards, the level of the new launch and sold units are expected to improve in 2021 hovering at around 24,000 – 26,000 units in 2021. The Hanoi residential market is expected to strongly expand to new locations while projects at established clusters will look to upgrade their positioning. Therefore, more affordable projects are forecasted to shift further away to outside of Ring Road No.3.

 

In terms of selling prices, average primary pricing is expected to increase at around 4-6% y-o-y in 2021, boosted by the introduction of high-end projects anticipated at prime locations. Meanwhile, pricing escalation of new projects at new locations will be tested.

 

In a year of disrupted activities due to local lockdown and suspended travels, technology came into play to assist with sales and investment decision makings. Ms. An Nguyen – Director of Hanoi Branch, CBRE Vietnam noted “Local developers have looked into ways to embrace technology to streamline the sales process. This has come in even more relevant in the pandemic era, as the technology could help minimize disruption and risks. In upcoming years, proptech, big data and technology will play critical parts in analyzing and understanding the buyers, helping developers to capture the demand and seize new opportunities, as much as disrupting and challenging any outdated approach to market products”.

 

Office

 

In Q4 2020, the Hanoi office market welcomed one new Grade B project, Century Tower in Times City, making it one of the two new projects added to the market during 2020 together with Capital Place that was introduced in Q3 2020.  As such, the new supply of the Hanoi office market during 2020 recorded a total of 126,000 sqm NLA, the highest since 2014. Total office space of both grades in Hanoi surpassed 1,500,000 sqm NLA, with more than one-third of the total supply from Grade A projects.

 

Vietnam’s economy was heavily impacted by the COVID-19 pandemic. As a result, certain tenants contracted their office space during the year. Even though the market performance was improved in Q4 2020, the total net absorption of the Hanoi office in 2020 was around (9,000) sqm.

 

 

Due to the contraction trend and large supply in 2020, vacancy rates of Grade A office in Hanoi surged to 23.2%, down by 1.1 ppts q-o-q and up by 15.7 ppts y-o-y. Vacancy rates of Grade B projects also raised to 13.5% as of Q4 2020, up by 2.1 ppts q-o-q and 4.3 ppts y-o-y.

 

In terms 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 3.7% y-o-y, to US$13.8/sqm/month, asking rent of Grade A increased by 2.2% y-o-y, reaching US$26.8/sqm/month, attributed to the premium asking rent of the new Grade A project. If not taking into account the impact of the new Grade A project, the asking rent of the Grade A office would have dropped by 2.9% y-o-y.

 

 

In 2022, the Hanoi market is expected to welcome nearly 200,000 sqm new supply. Some notable projects include Techno Park Tower in Ocean Park, HUD Tower in Thanh Xuan district, and Thai Building in Cau Giay district. Amongst these, Techno Park Tower, with its large scale of 115,000 sqm NLA, is expected to create an emerging office location on the east side of Red River.

 

In terms of demand, Banking/Finance/Insurance, Manufacturing, and IT/Tech continue to be the key demand drivers for the market. The market also observed rising demand from selected sectors such as Logistics, Education, and E-commerce, while some sectors such as Flexible workspace and Energy are slowing down their leasing activities. We expect that the demand drivers will continue to shift, as the pandemic unfolds.

 

According to the latest survey by CBRE, 35% of companies in the Asia Pacific area are now encouraged employees to work in the office and allow them to work from home if they wish. A workspace that offers flexibility for employees is becoming more important, as more companies plan to adopt a hybrid model with both remote and office-based working. Office density is also expected to decrease in selected companies due to an increase in health and safety concerns.

 

Retail

 

Looking back in 2020, retail sector is one of the most affected sectors by the Covid-19 pandemic. Vietnam’s total sales and service consumption in the 2020 only grew by 2.6%, much lower than the increase of 11.8% in 2019.

 

Retail real estate also witnessed some significant impacts during the year of the outbreak.  In Hanoi, retail space saw vacancy rates increase in both CBD and non-CBD area. In CBD, vacancy rate increased by 12.9ppts y-o-y, reaching 14.3%, the highest level since 2011. At the same time, the vacancy rate in the non-CBD area increased by 3.3 ppts y-o-y, to 12.3%. As most tenants experienced challenges during this tough time, the group of tenants that suffer the most to the point of closing the store is often in Fashion & Accessories, Foods & Beverages, which located on the higher floor in shopping mall in the CBD area.

 

However, with continuous efforts to control epidemics throughout the year, the retail market in Vietnam has regained its momentum, through the openings of two retail projects in Q4 2020, namely International Centre (renovated) and Vincom Mega Mall Ocean Park, adding 41,000 sqm NLA to Hanoi’s retail supply. As a result, by the end of 2020, Hanoi retail supply volume reached 1,050,000 sqm, increasing 4% compared to 2019. Still, the growth rate is lower than the rate of two recent years as some projects were not launched as expected due to Covid-19. Average asking rents (first floor and ground floor, excluding VAT and service charges) in the CBD increased by 9.7% YoY, reaching US$107.7/sqm/month due to a number of retail space at prime location is offered at a higher rental level, after being upgraded. On the other hand, asking rents in the non-CBD area recorded a slight increase of 1.3% y-o-y, reaching US$24.5/sqm/month.

 

 

Even though delayed openings have caused lower new supply observed this year, the market is still set to welcome more than 300,000 sqm NLA under the supply pipeline during the next 3 years, located mainly in non-CBD areas. Three large-scale projects are scheduled to be opened, Lotte Mall Hanoi, Aeon Mall Giap Bat, and The Manor Central Park utilizing immediate demand within mega residential projects in the North and South of the city.

 

Although there were limited new entrants due to the barrier of quarantine, existing tenants began to develop stronger market presences such as Uniqlo and MLB opening new outlets while The Coffee House and Kichi Kichi launching their new concept stores.

 

The outbreak of the Covid-19 epidemic has reshaped consumer shopping behaviors, emphasizing the trend of e-commerce and wellness. The number of stores for pharmacy in Hanoi is recorded to increase by 65% y-o-y, from 26 to 43 stores, as a healthy lifestyle is becoming more important and trendier. Furthermore, shoppers have transitioned to visiting stores less frequently but spending more on each visit or have shifted towards online channels.

 

Vietnam Industrial Real Estate Market

 

During the COVID-19 pandemic, the industrial market is the only real estate sector that witnessed positive progress in both rental rates and occupancy rates. As of Q4 2020, average occupancy rates of existing industrial parks since 2019 in five key Northern industrial cities and provinces (Hanoi, Bac Ninh, Hung Yen, Hai Duong, and Hai Phong) reached 89.7%, a 2.1 ppts increase y-o-y. Similarly, the occupancy rate of four key Southern industrial cities and provinces reached 87.0%, a 2.5 ppts increase y-o-y.

 

 

Due to the production movement from China as well as EVFTA, demand for industrial land is increasing across Vietnam. CBRE recorded that asking rents in some industrial parks in Hai Phong, Bac Ninh and Hai Duong in the North and Ho Chi Minh City, Dong Nai and Long An in the South increased from 20% to 30% y-o-y.

 

 

Performance of ready-built factory and warehouse market remained stable y-o-y due to large supply added in 2019 and 2020 as well as delayed leasing activity from travel restrictions. The strong growth of e-commerce and logistics companies since the outbreak of COVID-19 boosted demand for storage space and distribution facilities. As a result, the need to find a land bank for developing logistics facilities increased significantly, reflected in the 20% of total inquiries for this sector, recorded by CBRE. In prime locations with limited industrial land supply, high-rise warehouses have also begun to emerge to create larger storage space for the needs of e-commerce companies, especially as last-mile delivery locations.

 

 

With its resilience during the pandemic, the industrial sector in Vietnam became an attractive opportunity for both international and local players. In 2020, despite the pandemic, international warehousing giants such as GLP, LOGOS, and JD.com entered and heavily invested in both Northern and Southern of Vietnam. Vingroup, a major local real estate developer, recently joined the market with two new industrial parks expected to be ready in 2021.

 

Expansion of existing factories and new construction of manufacturing facilities in the context of accelerated relocation strategy will be the main source of demand in the coming time. While industrial land rent has reached a high level in well-located industrial parks, tenants have to seek new land supply in areas that are further from existing industrial hubs. In addition, industrial real estate developers are making changes in product development to adapt to the new situation. Outstanding features are the application of modern technology to management and operation of the facility, providing service packages including legal, human resources to help customers save time and costs during project implementation. This is gradually creating a new model of industrial real estate development in Vietnam which integrate industrial property provision and investment as well as management support services.

Note:

  •   Asking rent of industrial land and Warehouse/Ready-built factory does not include VAT and Management fee.
  •   Asking rent of industrial land is calculated for remaining lease term of a project (which is normally from 30 to 45 years).

 

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.