OPPORTUNITIES FOR TENANTS IN A DOWN MARKET

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OPPORTUNITIES FOR TENANTS IN A DOWN MARKET

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Where we are now? The growth environment of early 2008 has changed to cost containment in 2009 Real Estate costs are often the second largest expense for Companies – typically behind labour In a contracting economy, an aggressive occupancy cost reduction plan can mean the difference between success and survival Following headcount reduction activities over the last 6 months, some corporate occupiers are carrying a significant amount of vacant space Market conditions have given rise to new opportunities for restructuring leases...

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Nội dung Text: OPPORTUNITIES FOR TENANTS IN A DOWN MARKET

  1. OPPORTUNITIES FOR TENANTS IN A DOWN MARKET PRESENTED TO EUROCHAM BY RICHARD LEECH 15th April 2009
  2. Agenda Where Are We Now Hanoi Office Market Hanoi Serviced Apartment Market Seizing Market Opportunities inc. Lease Restructuring CB Richard Ellis | Page 2
  3. Internal Conditions & Drivers CB Richard Ellis | Page 3
  4. Where we are now? The growth environment of early 2008 has changed to cost containment in 2009 Real Estate costs are often the second largest expense for Companies – typically behind labour In a contracting economy, an aggressive occupancy cost reduction plan can mean the difference between success and survival Following headcount reduction activities over the last 6 months, some corporate occupiers are carrying a significant amount of vacant space Market conditions have given rise to new opportunities for restructuring leases By mid-2008, most Asian markets had achieved record high rents with five of the world’s ten most expensive office markets located in Asia In HCMC we have seen Grade A rents for new or under construction properties drop 30 to 40% from their peaks. In Hanoi we are seeing an 8% quarter on quarter drop in office rents on existing buildings. Landlords are keen to secure reliable income that will see them through this economic downturn and a significant amount of planned new supply. They are offering capital contributions to fit-outs, free rent periods, enhanced flexibility, and lower face rents to attract quality tenants for longer lease term durations. CB Richard Ellis | Page 4
  5. Stock Market Rising - 30 Day Trend Graph from VNDirect CB Richard Ellis | Page 5
  6. Web Analytical Data – Heat Graph Apartments for Sale: Jan – Dec 2008 This heat graph shows the individual listings and the color shows the number of views. shows views. Lighter blue is fewer views, darker purple represents more views. Heat Graph provided by MetVuong.com CB Richard Ellis | Page 6
  7. What’ What’s driving the office market? Landlord Market Balances Market Tenant Market Landlords Tenants Higher Rents Lower Rents Tenants Landlords High Occupancy (95- (95- Time favours Tenant Space Options 100%) Competitive Time favours landlord Market Tenants Landlords Lack of space High Vacancy Less favourable rental terms Lower Cash flow CB Richard Ellis | Page 7
  8. Hanoi Office Market CB Richard Ellis | Page 8
  9. Regional Comparisons Change in Office Rents in the Region as at Q4/2008 30 20 10 Percentage Change 0 HCMC Hanoi HongKong Singapore Manila Bangkok Jakarta -10 -20 -30 Quarter-on-Quarter Year-on-year Source: CBRE (Vietnam) CB Richard Ellis | Page 9
  10. Office Rent Cycle – Hanoi Office Market Phase I II III IV Hanoi City 2005-2008 Q2 2008 Q1/2009 2010-2011 CB Richard Ellis | Page 10
  11. Hanoi Office Market Supply 2007 to 2010 Hanoi Office Market - 2007 to 2010 1,000,000 942,000 900,000 800,000 700,000 622,000 600,000 sm 500,000 412,000 379,000 400,000 300,000 200,000 100,000 0 2007 2008 2009 2010 year Source: CBRE (Vietnam) CB Richard Ellis | Page 11
  12. Asking rents of Grade A and B AV ERAG E ASK ING RENT S OF HANOI G RADE A & B OF F ICE P ROP ERT IES 20 0 7 - 2 00 9 $60 (incl. service charge and excl. VAT) $50 US$ psm per month $40 $30 $20 $10 $0 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 Grade A Grade B Source: CBRE (Vietnam) CB Richard Ellis | Page 12
  13. Current asking rents CUR RE N T A S KI N G R E N T S of MA JO R O F F I CE BUI LDI N GS I N HA N O I $70 $65 $60 $55-$60 $55 $50 $45-$55 $45 $40 $35-$45 $35 $30 Sun Red River, Hanoi Tower, Opera Business Center, Asia 63 Ly Thai To, Central Building, HCOB, Vincom City Tower Tower, Vietcombank Tower Pacific Place, Sun City *Buildings are not listed in any particular order within rental ranges. CB Richard Ellis | Page 13
  14. Occupancy rates in existing buildings RECENT HANOI OFFICE MARKET OCCUPANCY STATISTICS Year 2007 2008 2009 Current Grade Grade A 99.6% 98.7% 97.91% Grade B 95.0% 97.3% 83.37% Overall 97.3% 98% 90.64% Source: CBRE (Vietnam) CB Richard Ellis | Page 14
  15. Proposed headline rent & GFA – 2009 new buildings New Hanoi Grade A&B Office Supply Proposed rent GFA sq.m Capital Tower Approx US$50 23,000 BIDV Tower US$60 – 70 23,800 CDC Building US$30 6,160 Resco Building US$35 21,000 CMC Building US$20- US$20- US$22 15,000 CEO Tower US$25 – US$28 18,000 Vinaconex 9 US$25 – US$28 18,000 Plaschem Plaza US$22 12,800 Cau Giay New Submarket Unknown 40,000 Vinaconex Tower unknown 10,000 Hacinco Complex unknown 3,000 197,760 * The above rentals include Service Charge, exclude VAT CB Richard Ellis | Page 15
  16. Hanoi office market – Net absorption & vacancy rate NET ABS ORP T ION AND V ACANCY RAT E OF G RADE A & B OF F ICE P ROP ERT IES 60,000 60% 50,000 50% 40,000 40% 30,000 30% sm 20,000 20% 10,000 10% 0 0% -10,000 -10% 2004 Q1 2004 Q2 2004 Q3 2004 Q4 2005 Q1 2005 Q2 2005 Q3 2005 Q4 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 Net Absorption Vacancy Rate Source: CBRE (Vietnam) CB Richard Ellis | Page 16
  17. CB Richard Ellis | Page 17
  18. Hanoi My Dinh New Urban Area office supply in 2008, 2009 CB Richard Ellis | Page 18
  19. Hanoi Serviced Apartment Market CB Richard Ellis | Page 19
  20. Cost of living- 2008 living- Vietnam gets less expensive! (Mercer report - 2008) • Hanoi drops 35 places to rank 91st • Ho Chi Minh City drops 40 places to rank 100th Reasons: • Stable VND against USD • Lower inflation observed on goods here compared with New York More comfortable life with lower budget CB Richard Ellis | Page 20

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