THE VIETNAM RETAIL REAL ESTATE MARKET · A need for larger-sized shopping centres … enhancing the...

THE VIETNAM RETAIL REAL ESTATE MARKETTHE VIETNAM RETAIL REAL ESTATE MARKET––

THE PERFECT MIX OF THE PERFECT MIX OF

OPPORTUNITY AND TIMINGOPPORTUNITY AND TIMING

Presented by:Presented by:Mr. Richard Leech Mr. Richard Leech –– Executive DirectorExecutive DirectorCB Richard Ellis (Vietnam)CB Richard Ellis (Vietnam)

17 Nov 2008

CB Richard Ellis |

Global economic downturn

US financial crisis, sub-prime crisis spreads to Asia

Commodity prices started to retreat

Crude oil rebounds again to $59.97 per barrel (10 Nov 2008) from US$148 (Jul 2008)

Gold price: • $US1,010/ounce (Mar 08)• US$750/ounce (Nov 08)

ECONOMIC OVERVIEWGlobal Economic Environment

CB Richard Ellis |

ECONOMIC OVERVIEW

Current Situation• Strong FDI flow (US$58.3 billion of registered capital YTD)• Banks loosening credit tie for construction loans & individuals

•Lending rate: 15%, decreasing from 21%•Deposit rate: 14%, decreasing from peak 20%•Base rate: 12% (from Nov), down from peak 14% (Jul-Oct)

• CPI decreasing in the last few months• Slow construction progress

Impacts from global economy• Stock market fluctuation• Potential capital shifting from developed markets to developing markets • Diversification, spreading risk• Investors seeking different opportunities• Global unemployment, MNCs headcounts are under review

Vietnam Economy

CB Richard Ellis |

FDI (2008 YTD): US$57.2 billion

Implemented FDI capital (YTD): US$8.1 billion

ECONOMIC OVERVIEW

Vietnam - FDI Flow

FDI PROJECTS LICENSED IN 1988-2008

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

55.00

60.00

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Prel

. 20

07

Q3/

2008

Bill.

US$

FDI Capital Inflows Implemented Capital

CB Richard Ellis |

Sep ‘08 m-o-m: +0.18%

lowest in the recent 17 monthsQ3 ‘08 y-o-y: +22.76%

Q3 ’08 vs. Dec ‘07: +21.87%

Est. average 2008: 25% (ADB)

ECONOMIC OVERVIEW

Vietnam – INFLATION

CB Richard Ellis |

Total retail sales of goods & services: US$42.5 billion

ECONOMIC OVERVIEW

Retail Statistics

VIETNAM RETAIL SALES AS A % OF GNI

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Prel

. 2007

bil

l. D

ong

0%

10%

20%

30%

40%

50%

60%

70%

Retail sales At Current Prices % Of GNI

CB Richard Ellis |

> US$ 45 billion retail sales in 2007 and growing around 20% annually

Consumer spending expected to hit > US$ 60 billion in 2010

ACCUMULATED RETAIL SALES

-

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

Jan

Feb

Mar

Apr

May Jun

Jul

Aug Sep

Oct

Nov

Dec

bil.

US$

2004 2005 2006 2007 2008

ECONOMIC OVERVIEW

Retail Statistics

CB Richard Ellis |

CONCLUSION

International retailers have not altered their long term growth strategy in Asia and are aiming to further penetrate markets across the region particularly in emerging economies such as China, India and Vietnam. However such companies are expected to be highly prudent when it comes to choosing locations and will budget rental expenditure with great caution.

CB Richard Ellis |

GROWING RETAIL SALES - Hanoi

Hanoi Income per capita approx. US$1,900 , increasing 23% year on year

HANOI TOTAL RETA IL SALES OF GOODS AND SERVICES

-

1,000

2,000

3,000

4,000

5,000

6,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Est.2008

mi l l ions US$

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

US$

Hanoi Total Retail Sales

Hanoi Total Retail Sales per Capita

CB Richard Ellis |

… be prepared for the future

Over 6 million visitors in 2007 (10m visitor arrivals projected by 2010)

HANOI POPULAT ION

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2005

2006

2007

Est. 2008

Est. 2009

Est. 2010

Est. 2011

thous. p

ers

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

Average Population Growth rate

VISITOR ARRIVALS TO HANOI

0.00

2.00

4.00

6.00

8.00

10.00

12.00

2005 2006 2007 2008_F 2009_F 2010_F 2011_F

mil.

arr

ivals

Domestic Visitor Arrivals International Visitor Arrivals

CB Richard Ellis |

WTO COMMITMENT ON DISTRIBUTION

OF RETAIL SERVICES

• Future “As of 1 January 2009, there shall be no limitation on foreign capital contribution in the

joint ventures”.

… be prepared for the future

•Currently, “Upon accession, joint ventures shall be

allowed with foreign capital contribution not exceeding

51% of the legal capital of the joint venture”.

VIETNAM 2009

•Quality locations

•EMT

•Critical mass

Challenges:

CB Richard Ellis |

KEY TRENDS AFFECTING RETAILING IN VIETNAM (1)

More established banking network with facilities / modern Point Of Sales

Retailers expand to be more ACCESSIBLE(each District in Hanoi/HCMC can easily host a large hypermarket and/or department store)

Consumers having less time to travel for their

shopping needs

Traditional retail formats (street stalls, shop houses) still being highly prominent in developing countries including

China, Indonesia, Philippines & Vietnam

The potential for MODERN RETAIL formats’ growth is HIGH

CB Richard Ellis |

KEY TRENDS AFFECTING RETAILING IN VIETNAM (2)

More international experienced retail developers are active in the market (Koreans, Taiwanese, Singaporeans, Malaysians)

A need for larger-sized shopping centres

… enhancing the shopping experience

Greater demand for new products and entertainment

Strategic Partnerships are increasingly important (previously developers needed cash, now cash & retail expertise is in demand)

a new dimension to shopping in Vietnam

CB Richard Ellis |

CONCLUSION

These trends are likely to remain in force for some time as:FDI increasesUrbanization continuesGovernment places an increasing emphasis on policies

designed to facilitate foreign investment

Many retailers and developersentering or actively evaluating

the market due to its:

SizeRecent WTO accession

Sustained strong economic growthExpanding leisure class and rising levels of

disposable incomeSize and extent of its population in their

prime spending years

CB Richard Ellis |

Total Stock ≈ 100,000 sm GLA (13 shopping centres/dept. stores) • Most are located in CBD areas (Hoan Kiem, Hai Ba Trung)

Occupancy Rate ≈ 90% • CBD shopping centres are fully occupied• Retail centres in inferior locations encounter vacancies

Rental Rate• Non-CBD: US$25 - US$60/sqm/month• Prime CBD: US$65 - US$130/sqm/month

HANOI RETAIL MARKET

Hanoi Retail Stock

CB Richard Ellis |

PRIME RETA IL RENTALS IN KEY ASIAN COUNTRIES

0

100

200

300

400

500

600

700

800

Toky

o

Hon

g Kon

g

Shan

ghai

Bejin

g

Taip

ei

Sing

apor

e

Bang

kok

Man

ila

Jark

ata

Han

oi

HCM

C

US$/s

m/m

onth

Average Prime Rental Rates (US$/sm/month) Highest Average Prime Rental Rates (

HANOI RETAIL MARKET

CB Richard Ellis |

Modern Retail centers / Population Density

Future retail projects Existing retail projects

CB Richard Ellis |

2009: ≈ 41,625 sqm

2010: ≈ 41,496 sqm

2011: ≈ 330,251 sqm of retail space • Most future retail centers are located around My Dinh area

HANOI RETAIL MARKET

Future Retail Supply

2009

2010

2011

CB Richard Ellis |

Ongoing shortage of modern, quality retail space will continue to sustain retailers’demand for shop houses

Shop houses rents in central location can be as high as US$110/sqm/month Both local and international retailers will continue to strengthen their presence to

increase market share

Tenants are becoming more savvy about retail centres

Landlords of shopping centres with less convenient location are likely to reduce asking rents and restructure tenant mix

HANOI RETAIL MARKET

Retail Market Outlook

CB Richard Ellis |

•Location: My Dinh – Me Tri, Tu Liem Dist.

(Next to the Manor Hanoi)

• Developer : Bitexcoland

•Description: An officetel / retail complex

with cinema component.

•Net Leaseable Area: 18,925sqm

•Completion: Q1/09

HANOI

THE GARDEN SHOPPING MALL

HANOI FUTURE RETAIL SUPPLY

CB Richard Ellis |

Location: 114 Mai Hac De Str., Hai Ba Trung Dist.

Developer: Vincom JSC

Concept: Luxury Apartments & Shopping Center

Number of floors: 25

3 Basements

1F-7F: Retail (Appx: 14,000sqm)

8F-25F: Residential

Ground Breaking: Q1, 2008

Expected completion of retail podium: Q4, 2009

VINCOM PARK PLACE


CB Richard Ellis |

Location: 88 Lang Ha St., Dong Da Dist.

Developer: Hanotex

Land Area: 8,760 sqm

Gross Area: 91,466 m2

Description: 3 basements + 462 Apartments; Office

(9,340 sqm) & Retail (5,400sqm)

Ground Breaking: Nov 2007

Completion: 2010


SKY CITY TOWER

CB Richard Ellis |

Location: Tran Duy Hung Str., Cau Giay Dist.

Developer: Charmvit Corporation

Land Area:19,689sqm

Gross Floor Area: 150,146sqm (Hotel, Office &

Retail)

Retail: 27,461sqm GFA

Expected Completion: 2010

HANOI PLAZA HOTEL


CB Richard Ellis |

Location: Dao Tan – Lieu Giai Str., Ba Dinh Dist.Developer: Coralis VietnamNo. of floors: 63 (incl. 5 basements)Site area:14,094.00 sqmTotal gross area:253,394.59 sqm (Retail, Office,

Residential)Retail Podium (Bas5-7F): 34,682.07 sqm –

Department StoreGround breaking: 2007Expected Grand Opening: 2011

HANOI CITY COMPLEX


CB Richard Ellis |

Location: Pham Hung Str., Tu Liem Dist.

Developer: Keangnam Enterprises Ltd.

Gross Floor Area: 579,000sqm (Retail, Office, Apartments for sales, Hotel, Serviced

Apartments)

Retail: 82,875sqm GFA (6 floors)

Ground breaking: Q3, 2007

Expected Grand Opening: 2011

KEANGNAM HANOI LANDMARK TOWER


CB Richard Ellis |

YEN SO PARK SHOPPING MALL

•Location: Yen So Ward, Hoang Mai Dist.

•Owner & Developer : Gamuda Land Group

•Description : The Center of all commercial

activities, complimented by the festive retail,

offices, hotels and convention center.

•Land Area: 3.85 ha

•Retail NLA : 49,253 sqm (4 Storey Podium)

•Completion: 2011


CB Richard Ellis |

•Location: Lac Long Quan, Tay Ho Dist.

•Owner: Citra Westlake

• Description: Regional shopping mall

• Net Lease able Area: 114,000 sqm

(incl. foodcourt, cinema, department store,

hypermarket)

•Expected Completion: 2011

HANOI

CIPUTRA HANOI MALL


CB Richard Ellis |

INDOCHINA PLAZA HANOI


•Location: Xuan Thuy, Cau Giay Dist.

•Developer: IndochinaLand

•Luxury Apartments (2 towers, 25 & 30 floors), Office (15 floors) & Retail (5 floors)

•Total GFA: 124,489sqm

•Net Leasable Retail Area: 19,929sqm

•Completion: 2011

CB Richard Ellis |

SAVICO PLAZA LONG BIEN


•Location: Nguyen Van Linh Str., Long BienDist.

•Developer: Savico

•Concept: Hotel & Shopping Center

•Land Area: 49,900 sqm

•Retail Area: 42,000 sqm

•Completion: 2011

CB Richard Ellis |

A.T. KEARNEY’S GLOBAL RETAIL DEVELOPMENT INDEX 2008

Vietnam Tops A.T. Kearney's Annual List (2008) of Emerging Opportunities For Global Retailers.

Amongst the top 4, VN scores:Highest mark for country riskHighest mark for time pressureLowest for market attractiveness2nd highest for market saturation

Rapidly growing per capita incomeDrastic opening up of regulations for new entryAbsence of competitionStrong GDP growth rateYoung population with increased spending power

-134China

-123Russia

-112India

+341Vietnam

Change2007 Rank

2008 Rank

Country

CB Richard Ellis |

RETAIL ASIA-PACIFIC TOP 500 FOR 2008

chosen by the Asia Retail Journal (voting by readers and supply chain industries)

lists the top 500 retailers in 14 economies across Asia Pacificbased on the primary criteria of overall sales turnover and

sales turnover per sq.m

Top 500 Retailers for the year

Top 10 Retailers in each market

Top 10 Retailers in each of several retail formats

“Best of Best” – added criteria: shop design & layout,

staff training, merchandising, customer satisfaction, …

RANKING

Organiser Official Market Information Provider

Audit & Advisory Services Provider

CB Richard Ellis |

Saigon Co-op Mart, SJC & Saigon-Nguyen Kim rank among The Region’s Top 500 Retail Companies

3526Ho Chi Minh City Book DistributionFahasaBookstore

4915FPT CorpFPTHardline

491International Beverages Co (IBC)Diamond PlazaDept Store

5360Hanoi General Trade JSCHapro MartVarious

677Casino Guichard Perrachon SABig CHypermarket

90655G7 Trading & ServiceG7 MartC-Store

11678Phu Nhuan Jewelry Joint StockPNJOthers

1652Nguyen Kim Tien Trade & ServiceSaigon Nguyen Kim Shopping CenterHardline

214115Saigon Jewelry HoldingSJCOthers

25462Saigon Union of Trading CooperativesSaigon CoopVarious

2007 Sales (US$mns)

No. of outlets 2007Retailing CompanyBrand(s)Outlet Type

The Region’s top 500 Retail Companies By Country

VIETNAM

RETAIL ASIA-PACIFIC TOP 500 FOR 2008

CB Richard Ellis |

SETTING THE RENT

Market Related (Benchmarking)

• Existing projects

• Upcoming projects

• Retail Demand/Supply

Affordability

Turnover share can be

Up to 20% to 25%

of the Turnover

Turnover Analysis

• Trading density

• Turnover ratio

1. Categories

2. Time

RESEARCH!

CB Richard Ellis |

SETTING THE RENT

Market Rent

Turnover Share

Escalation

1. Trading Density2. Turnover Ratio

CHECKING!

CB Richard Ellis |

MEASURING RETAILER PERFORMANCE

Centrally located shopping centres & department stores:

Enjoy a high average rental rate (currently around US$ 60 per sqm/mth)

Prime retail rents as high as US$ 130 per sqm/mth

Retailers achieve a high gross sales revenue per sqm within CBD • Leading to (for most retailers) an affordable and sustainable rental

cost ratio to sales

CB Richard Ellis |

MEASURING RETAILER PERFORMANCE

NLA (sqm)

Category Units Rental Rate

Range (US$ / sqm / month)

Average Rental

Rate (US$ / sqm / month)

Occup. rate (%)

Average shop size

(sqm)

Trading density (US$ / sqm / month)

Rental cost Ratio (%) - % of total sales paid

to rent

120 Jeans 4 70 - 90 80 100 30 800 10%

455 Casual Wear / Unisex

13 70 – 90 80 100 35 750 10.7%

210 Men’s Wear 7 70 – 90 80 100 30 800 10% 480 Women’s

Wear 16 70 - 90 80 100 30 850 9.4%

105 Shoes 7 70 - 90 80 100 15 700 11.4 1,370 - 46 - 85 100 29.8 780 10.3%

Source: Retail Consultancy CBRE (Vietnam) – Extract from a CBD retail location in HCMC

Example:

Tenant A leases 100m2 for a fashion clothing shop.Tenant A averages US$78,000 per month or US$780.00 per square meter per

month turnover.Tenant A can afford to pay 20% rent to turnover ratio.Therefore Tenant A can pay US$15,600 per month or US$156.00/m2/mth

CB Richard Ellis |

THE FUTURE OF RETAIL IN VIETNAM - FOUR PROPOSITIONS

“… SHOPPING IS THE PURPOSE ANDDRIVER OF CHANGE…”

“… SUCCESSFUL RETAILING WILL ALWAYSMIRROR THE SOCIETY IT SERVES…”

Shift from COMMAND to DEMAND Economy

Burgeoning Spending Class

… need modern and COMPELLING RETAIL

Younger, more Aspirational Customers

VIETNAM

CB Richard Ellis |

“… SHIFT from the MATURE MARKETS to the EMERGING MARKETS”

MATURE MARKETS EMERGING MARKETS

Consolidation

Technology

New Formats

Sustainability

Pro-active Consumers

Transfer Brand Equity

Luxury (Exclusivity)

Choice

Organised Sector

Globalisation

Trained Staff

Aspirational Consumers

Local Players

Luxury (Status)


CB Richard Ellis |

“… INNOVATION AND THE CUSTOMER SHOPPING EXPERIENCE ARE PARAMOUNT …”

REAL

VIRTUAL

MATURE EMERGING

Technology allows new thinkingNew experiences require new formats

Customers are communitiesInnovation = Oxygen


CB Richard Ellis |

HOW GLOBAL ARE RETAILERS?

Vietnam likely to follow China: Similar characteristic as the China market 10 years agoEmerging country – High density and young population - Under supplied retail

developments - Luxury and high end brands presence

China is best in Asia and ranks in the worlds Top 10 of “most international retail markets”,with same level of International retailers presence as mature economies (US, UK, France, Italy…)

Huge influx of retailers in China, due partly to:Relaxation of restrictions on foreign investmentWTO in 2001Increase in average consumer spending

VIETNAM 2009

CB Richard Ellis |

SHOPPING MALL vs. HIGH STREET RETAIL

Quality assurance

Or Main street retail One stop shoppingHigh Street Retail Shopping Mall

More brands under one roof

Difficulty in car parkingGuaranteed car/motorbike parking

Shop by shop

Secure environment

Unsanitary streets or shops

Price Haggling

Product risk

Original products

Fun and great ambiance

Constant Temperature

Long spending time

CB Richard Ellis |

SHOPPING MALL vs. HIGH STREET RETAIL

A major metamorphosis has taken place, more and more shoppers drive further to be in modern shopping centers, instead of traditional shopping places

Advantages for developers:Pre leasing spaces before completion

Shoppers willing to spend hours or all day for the ultimate shopping experience

High street still reigns:Open-air caféTraditional historic placesShow off places

CB Richard Ellis |

Retail Management

Increased Free Cash Flow = Increased Shareholder Value

Saving Operational Expenses

•Facility Management•Best Practices•New Technologies

Increasing the Reputationof the Retail Object

•Higher Base Rents•Higher Service Charges •More Customers Coming

•Higher Hit Rate•Attracting Better Tenants

•Layout Planning•Fitting out Guidelines / Supervision•Analysis of Qualitative and Quantitative Data•Latest International Trends•Proper Merchandising / Theming•Constant Adjustment of Tenant mix

RETAIL PROPERTY MANAGEMENT

CB Richard Ellis |

Retail StageRetail Management•Proper Facilities•Theming•Events / Merchandising / Decoration•Market Information / Trends•Guidelines•Adjustment of fees, eg. TO based

Customer•Increasing Disposable Income•More free time•Rising Brand Awareness•Low Brand Loyalty•Very young•Looking for the “latest”

Tenants•Shorter Development Cycles•Higher Fitting out Costs•More expensive market entrance•More Competition•Improving Distribution Channels


CB Richard Ellis |

The collective result of seven key strategies is a value-creating framework and known as

Strategic Performance Management -> Sustainability

•Focus all operations on one strategic vision (Be a Shopping

Center, not an accumulation of shops) •Be proactive, not reactive (Research, Latest Trends) •Embrace latest Technology, Personalized Marketing, Loyalty

Programs

•Adjust Layout Plans, Tenant Mix, Cluster Merchandise

Categories

•Always improve services, Introduce NEW services

•Automate best practices, adapt international practices

•(Fitting out Guidelines, SOP) •Capture knowledge, not just data, make decisions

•within a deep context (Turnover Figures, Foot Traffic)


CB Richard Ellis |

INTERNATIONAL COUNCIL OF SHOPPING CENTERSThe Global Trade and Professional Association of The Retail Real Estate Industry

Founded in 1957

Over 250 conferences & events annually

Relationships with 25 national and regional shopping center councils throughout the world75,000-plus members

in over 90 countries, includes: shopping

center owners, developers, retailers,

investors, lender,…

To advance the development of the

shopping center industry & to establish

the individual shopping center as a major institution in the

community

CB Richard Ellis |

MEMBER BENEFITS

INTERNATIONAL COUNCIL OF SHOPPING CENTERS

Conventions & Research

Education & Publications

Events & Programs

Others

ICSC Conventions more than 75,000 developers, owners, retailers & lenders for education & deal making, management & marketing

ICSC researches global and regional economic trends to help members solve problems and increase profitability

ICSC Education: ICSC's School for Professional Development, University of Shopping Centers, & Other educational programs

ICSC Bookstore: A full line of more than 75 books, manuals, packets and audiocassettes

ICSC Magazine, Newspaper & Newsletter: Shopping Centers Today, Value Retail News, SCT Xtra ICSC SmartBrief, EuroBrief, AsiaBrief and the SCT Newswire.

Government Relations

Specialized Conferences

Deal Making

Expositions

Idea Exchanges & RegionalConferences

Accreditation & Certification

Awards Program

Public Relations

Regulatory & Legal Guidancepublish the Shopping Center Legal Update

ICSC: A Global Associationprovide unparalleled global business opportunities

CB Richard Ellis |

Ha Noi office

12A floor, Vincom City Towers191 Ba Trieu

Hai Ba Trung District

Ho Chi Minh City office

1301, Me Linh Point Tower2 Ngo Duc KeDistrict 1

CB RICHARD ELLIS (VIETNAM)

Mr. Richard Leech – Executive Director [email protected]

CB Richard Ellis |

CB RICHARD ELLIS GLOBAL OFFICE

THANK YOU!

www.cbrevietnam.com

THE VIETNAM RETAIL REAL ESTATE MARKET · A need for larger-sized shopping centres … enhancing the...

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