Vietnam Real Estate Market Quarter 3 2013

According to Mr Jonathan Tizzard, newly appointed Associate Director – National Head of Valuation and Research – Cushman & Wakefield, rental prices in the grade A office space in Hanoi remained stable quarter on quarter and grade B witnessed a 2% decrease over the same time period. However, high vacancy rates and a large increase in new stock in the short term suggest pressure on rental levels will increase. Retail rents were stable over the quarter and with only Royal City from Vincom entering the market in the short term these are expected to remain stable. The supply of industrial space in Hanoi remained on par with the previous quarter and although there was a slight decrease in the rental rates for the area, investment certificates continued to be granted for projects and occupancy rates at the established parks remain high. The serviced apartment sector retained high occupancy rates and even witnessed an increase in rents during 2013Q2. However, the oversupply of apartments in the city will impact upon the serviced apartment market as more of this stock is converted. In the residential for sale market, there are approximately 10,000 apartment units which are still available for sale in Hanoi at the moment and there continues to be low absorption rates. However, developers are responding to the market conditions by changing the size of units and offering flexible payment terms. In addition, new supply in this market will be curtailed in the medium term due to the residential development moratorium, suggesting the residential for sale market will remain stagnant in 2013H2 but, with improved lending conditions, could provide encouraging signs towards the end of the year/beginning of the New Year.

Ho Chi Minh City’s office market recorded a slight decrease in rental rates in 2013Q2. The prospect of new space coming on line in the short and medium term will impact rents and occupancies. It looks set to remain a tenants’ market. Retail rates were also slightly down over the quarter and a dichotomy has emerged between CBD retail areas with high and stable occupancy levels and secondary/suburban areas that have reducing occupancy levels. Rents were also slightly down in the industrial market sector but the more established, older industrial parks have occupancy levels over 90% with only the new parks in Binh Chanh and Cu Chi District under 50%. The Serviced apartment sector saw Grade A occupancy fall slightly but rental levels remained stable. Grade B rents increased slightly but occupancy levels fell over 2013Q2 due to high asking rents offered by one new comer. The oversupply of apartments for sale in the city will impact upon the serviced apartment market as more of this stock is converted. Prices continued to fall in the apartment for sale market and this looks set to continue unless lending conditions improve significantly.

The real estate market has been in decline in Vietnam for some time now. Speculators have left the market for the most part with end users the targeted clients across the sectors. Whilst the general environment is fairly miserable, developers who undertake informed and reliable research and truly understand their markets and adapt their designs continue to sell their product. In addition, many commentators believe the bottom of the market is nearing. In these uncertain times, Cushman & Wakefield can help you make informed and articulate investment decisions.