Ho Chi Minh City – 05 October 2021 –

Condominium Market

Under strict social distancing regulations, according to Directive 16, only two high-end projects were launched online while others delayed their selling plan. Because of the disadvantages of conducting online transactions and the cautious psychology of both investors and customers, new supply fell to its lowest level over the past three years with 1,600 newly launched units, equivalent to around 40% of the previous quarter. However, despite conducting sales online, the two newly launched projects achieved outstanding performance with the sold rate of 82%; notably Binh Tan District firstly recorded a project in the high-end segment.

The total new supply in the first 9 months of 2021 was 7,464 units, down 35% compared to the same period in 2020. The total accumulated supply since 1999 of HCMC is 311,746 units. The mid-end segment led with 43%, followed by high-end (31%) and affordable (23%). The luxury segment accounted for 3% of the cumulative supply, with the entrance of branded residence projects having hotel operators. Branded residences could become a market trend with a series of projects about to be deployed in upcoming years.

The number of sold units in Q3 2021 decreased by 68% y-o-y to 1,582 units because of limited new supplies. Similarly, the first 9 months of the year recorded 8,956 units sold, down 17% compared to Q3 2020. Despite the short-term negative impact due to the pandemic, the condominium market still saw some positive signs. Online sales channels, namely mobile applications and social networks, were well-invested, attracting high customer interaction.

The average primary price was US$2,271 or VND 53 million per sqm (net of VAT), up 17% y-o-y. All segments witnessed positive price growths. The luxury segment had the highest price increase of 8% y-o-y thanks to Grand Marina, and the next phase of The River launched this year. The three remaining segments had average price increases ranging from 2% to 4% y-o-y.

In Q4 2021, we expect to have 6,000 condominium units newly launched, leading to the total new supply in 2021 reaching about 13,000 units. According to Ms. Dung Duong, Senior Director, CBRE Vietnam: “Gradually controlled pandemic and increasing vaccination rate are key driving forces to recover real estate industry, especially when business activities return to the "new normal". Positive signs even in the outbreak showed existing housing demand and confirmed the attractiveness of the residential property.” CBRE expects over 12,000 units sold in 2021 from new launch this year and inventory.

Primary prices will continue its upward trend thanks to steadily growing demand and scarce land bank in the inner city. The primary price of high-end and mid-end segments is expected to grow 3-7% y-o-y. Driven by the upcoming branded residence projects, the luxury segment will see the highest price increase of 7-8%. In contrast, the price of affordable segment will have not much fluctuation due to no new supply.

With the strategy of developing satellite urban areas of HCMC, the real estate picture in the South is promisingly prosperous. Binh Duong, Dong Nai and Long An provinces will bloom and have more products to meet diverse customer needs. In addition, infrastructure projects constructed through the pandemic and expected to be completed in 2022-2024 bring positive momentum to the property market in HCMC and surrounding areas. After a strong screening, the market is entering a new chapter with many changes in sales methods and buyers' tastes. CBRE believes that real estate is undoubtedly a safe and sustainable investment channel in the long run.

Notes on CBRE condominium ranking criteria:

• Luxury: projects that have primary prices over US$4,000 psm
• High-end: projects that have primary prices from US$2,000 psm to US$4,000 psm
• Mid-end: projects that have primary prices from US$1,000 psm to US$2,000 psm
• Affordable: projects that have primary prices under US$1,000 psm

(Selling price excludes VAT)

Office Market

HCMC imposed Directive 16 and forced people to work from home over the past 120 days. At the beginning of October, companies had their employees back to office gradually.

In such circumstances of pandemic control, most landlords applied support policies of reducing 20-50% of rental rate and service charge for office occupiers or allowed renewal contracts at a lower rental rate than during the pre-pandemic period. The number of transactions in the quarter was 30% lower than the average of the previous two months, and most transactions were of relocation. Based on CBRE record, relocation transactions accounted for over 40% of total transactions in the quarter and expansion, renewal and new letting transactions accounted for 15-20% of total transactions each. The top three most active industries in the quarters were Information Technology, Finance/Banking and Manufacturing, accounting for 80% of total leased areas. It is noteworthy that, despite lockdown, both landlords and occupiers were better accustomed to the situation. No return or contraction transactions were witnessed in Grade A and Grade B in HCMC in the quarter.

The level of inquiry was insignificant in the first two months of Directive 16 imposition and picked up as soon as HCMC announced to lift the restriction in October 2021. CBRE noticed that small and medium occupiers now take advantage of the lower-rent market to find new venues within the next quarter. Large enterprises and multinational companies focus on market study and outlook of the next 5-10 years to have constructive changes in their portfolio, focusing not only on locations and quantity but also on co-working workspace, well-being, environmental responsibility, etc.

In Q3 2021, there was not any new supply. The HCMC office market maintains the level of supply of 1,433,327 sqm net leasable area (NLA).

Vacancy rates for Grade A and Grade B were 10.8% and 9.8%, respectively. Net absorption was 4,892 sqm, which was relatively low but quite positive considering the lockdown period. The vacancy rate of Grade A continued to decrease by 1.5 ppt q-o-q thanks to net absorption in a new project in District 7 (UOA Tower) and competitive-rent projects at District 1. In the meantime, the vacancy rate of Grade B slightly increased by 0.2 ppt q-o-q due to increased vacant spaces at small scales projects that locate out of established office clusters. Projects within CBD fringe locations, such as Binh Thanh District, District 10 and Thu Thiem New Urban Area, recorded an increase in absorption in the quarter.

In terms of Grade A and Grade B rental rates, there was an increase of 0.4% and 0.1%, respectively. The rental rate was USD41.7 psm pm for Grade A and USD25.1 psm pm for Grade B.

In the last three months of 2021, the market expects three new Grade B projects with a total supply of 34,500 m2 NLA. From 2022 onwards, the market expects over 300,000 sqm of new Grade A supply, most noticeable at airport vicinity, District 1 and Thu Thiem New Urban Area. According to Ms. Thanh Pham, Associate Director of Research & Consulting, CBRE Vietnam: “HCMC office market is having signs of positive recovery on the background of no new supply. The pandemic has shifted the occupier’s demand, especially large enterprise and multinational companies. Developers of new Grade A projects in next three years need a careful review and study for a new, suitable strategy that incorporates investing in buildings’ features, factors related to environment, health and work safety for sustainability, in accordance with regional trends.”

Retail Market

COVID-19 control act has forced the shutdown of all shopping malls since June. All projects were considering reopening in October 2021 according to safety policy and reducing daily open time; entertainment sectors were still close until further notice. Existing tenants were freed from paying rent for the period under Directive 16 of Government.

In Q3 2021, the market did not welcome any new supply. The total retail supply in HCMC stayed at 1,068,128 sqm NLA. The rental rate in the CBD was USD137 psm pm, unchanged from the previous quarter, and the rental rate in the non-CBD was USD32.6 psm pm, a decrease of 3.8% q-o-q, for landlords offering incentives on vacant spaces. However, new absorbed areas were insignificant.

Nationwide retail goods and services turnover decreased by 28% y-o-y, according to General Statistics Office and the consumer confidence index was at a low level, according to research by Infocus Mekong. However, like previous quarters, we noticed active M&A activities from large corporations. In Q3, Masan invested in a 70% stake in Mobicast to expand in the field of digitalization and Mobile World recorded good performance from Bach Hoa Xanh supermarket chain. In other provinces, Go! Supermarket chain by Central Group will be active in expansion/renovation in the next two years. At large projects of townships, hospitality, etc., developers are paying more attention to their retail components.

The market expects over 200,000 sqm retail NLA by 2024 in different zones. In the short term, categories of F&B, Coffe Chain, Convenience store, Health and Beauty, Sport wear, Casual wear will continue expanding at shophouse format and in other provinces because of delays of the opening of new shopping centres in the city.

Leasing sentiment is still shy of positivity. According to Ms Thanh Pham, Associate Director of Research & Consulting, CBRE Vietnam: “We expect the market to experience down period in the last quarter of 2021 during which, pandemic control act is still going to be a priority of the city. In coming times, shopping centres, especially those of large scales, will need to adjust their support policies, lease terms, and update category mix to better fit demand for new brands. In terms of the macro-economy, only when GDP recovers alongside personal incomes improve, the retail market could enter a new cycle of growth.”