VIETNAM

QUARTERLY MARKET REPORT

HCMC

Apartment

After a moribund 2021, we're now seeing strong supply across many of the residential sectors. Healthy demand off the back of increased equity and lack of alternate investments, will support a rapid recovery in residential real estate.

Vincent Nguyen, Director of Residential Sales

Quarterly Primary supply increased to the highest in 2021 at 7,820 units. Demand was still positive at 81% absorption. Neighboring areas are thriving with Binh Duong as the rising star. Grade B will deliver the most, estimated at 145,500 units by 2025.

Villa & Townhouse

Due to the pandemic, 2021 had the lowest primary supply since 2016. However, absorption was still high at 85%. With available land banks and more affordable land prices, Dong Nai, Binh Duong and five suburban districts (Hoc Mon, Binh Chanh, Nha Be, Cu Chi, and Can Gio) will deliver strong future supply from 2022 onwards.

With limited HCMC stock, then purchasers have broadened their horizons to particularly Dong Nai, that has had a tremendous run. Now with supply released in alternate locations purchasers have greater choice, so 2022 will be interesting to follow geographic popularity and speculator longevity.

Troy Griffiths, Deputy Managing Director

Retail

Since 2019, retail occupancy has trended slightly downwards by -1 ppt pa but stayed high at 94% in 2021. In Q4/2021, average occupancy decreased -1 ppt QoQ and YoY to 93% when retail podiums and shopping centres had a -1 ppt QoQ occupancy decrease. This drop was driven by tenants terminating leases early or non-performers vacating. Forty percent of vacating tenants were in the F&B industry.

Traditional retailing remains in the doldrums, with a clear transition to offline channels that are growing. The reset will remove the opportunistic players and allow the more viable long-term retailers to consolidate

Troy Griffiths, Deputy Managing Director

Office

By 2025, future supply is expected to be 550,000 m2 GFA from 21 projects, 11 of which have 48% of the supply and are in the non-CBD. Four large-scale Grade A buildings are expected to enter from 2023 with an average scale of 67,000 m2, accounting for 49% of future supply.

The post lockdown market is resilient with high demand and low supply. Hybrid offices are becoming increasingly popular and are now a viable and cost-effective solution. Tenants from the IT sector are the most active, seeking offices across all grades. Despite a supply shortage, rents are unlikely to increase as small office absorption is slowing down

Tu Thi Hong An, Director of Commercial Leasing, Savills HCMC

Hotel

Following strict lockdowns, the hotel market showed some signs of recovery in October. In Q4/2021, the supply of 14,470 rooms from 104 hotels increased 39% QoQ but decreased -5% YoY after over 1,000 rooms in 37 hotels reopened. The 5-star segment led supply with a 47% share, followed by 4-star with 27%, while 3-star accounted for 26%. The supply of quarantine hotels increased 55% QoQ to 2,760 rooms in 23 projects as international flights resumed in October.

The gradual recovery of domestic and international tourism will breathe new life into the hospitality sector in 2022. Hoteliers should reinvent themselves to adapt to changes in post-pandemic travel preferences, such as sustainable tourism or the increased use of technology

Vo Thi Khanh Trang, Associate Director of Research, Savills HCMC

Serviced Apartment

Performance in Q4/2021 was relatively stable QoQ, but softer YoY. Average occupancy was 64%, increasing 1 ppt QoQ but decreasing -2 ppt YoY. Average rent reached over VND 485,000/m2/month, stable QoQ but decreasing -6% YoY as there were YoY rent decreases across all grades.

In a highly competitive landscape, serviced apartments have shown remarkably strong performance. With borders now reopening, improved performance can be expected

Troy Griffiths, Deputy Managing Director

HA NOI

Apartment

In Q4/2021, sales, absorption and prices all had quarterly increases. However, limited supply and prolonged lockdowns meant 2021 had the lowest sales in five years. By 2025, there will be a gap between the expected demand and the real primary supply.

In 2021, launches and sales were at a five-year low due to prolonged lockdowns, but towards the end of the year there were signs of recovery with increased activity. Local developers and branded operators are collaborating on upscale projects; however, there is a supply imbalance and more affordable stock is needed.

Do Thu Hang, Senior Director, Advisory Services, Savills Ha Noi

Villa & Townhouse

Despite primary stock increasing 3% QoQ, supply was still the lowest it has been in five years. In Q4/2021, performance improved with sales increasing 96% QoQ and absorption increasing 17 ppts QoQ. In 2022, 3,000 dwellings from 13 projects will enter, mostly in Hoai Duc and Dan Phuong.

Primary stock has been limited for a long time. However, there will be new supply in 2022, mostly in the large urban areas outside Ha Noi. Where the infrastructure improves, then supply, sales, and prices will also increase.

Matthew Powell, Director, Savills Ha Noi

Retail

The retail market showed signs of recovery after a historic contraction in the third quarter. Rent was stable QoQ and increased 1% YoY. By the end of 2021, only four of the ten anticipated projects launched. The six remaining projects are expected in 2022. Occupancy dropped -2 ppts QoQ and YoY to 92%. Eastern Ha Noi suffered in Q4/2021 with a decrease of -7,000 m2 NLA. The rise of GRDP and retail sales in Q4 are positive signs of recovery.

Retail brands were hesitant to open new sites, fearing lockdowns, and business disruptions at their existing sites. However, there were more demands for flagship stores from cosmetics, fashion, and F&B businesses.

Ms Hoang Nguyet Minh Director, Commercial Leasing, Savills Ha Noi

Office

Supply in 2021 increased 11% YoY thanks to the entry of large-scale projects in the non-CBD. Grade B had 50% of total supply, which represents an increase of 8% pa over the last five years. Demands in the non-CBD continue to rise; over the last three years, the average Grade A take-up in the non-CBD was 15,000 m2 pa while the CBD recorded negative take-up.

Mid-town and West Ha Noi provide plenty of Grade A options, from VND 460,000-920,000/m2/mth. IT and FIRE industries are showing sound demand for larger space over 1,000 m2.

Hoang Nguyet Minh Director, Commercial Leasing, Savills Ha Noi

Hotel

After lockdown restrictions eased in October, the sector had improved performance in Q4/2021. Average occupancy reached 27% and 5-star hotels had 31% occupancy. The average room rate (ARR) increased 6% QoQ and 12% YoY. By 2023, 13 new projects are expected to launch, eight of which will be 5-star hotels.

Easing travel restrictions meant Ha Noi's hotels had improved occupancy in Q4/2021. The rapid vaccination program is a positive step to welcoming foreign tourists again. Nevertheless, domestic visitors will continue to drive Viet Nam's hospitality sector.

Matthew Powell, Director, Savills Ha Noi

Serviced Apartment

Serviced Apartment supply increased 13% QoQ and 6% YoY, and 15 of the 61 projects were branded. However, average rent hit a three-year low and reached VND 547,000/m2/mth. Average occupancy increased 2 ppts YoY with several Grade A & B projects with over 90% occupancy. Future supply of 3,600 units will come from 17 projects; global operators will have 97% of this supply.

Potential FDI flows and large-scale infrastructure linking Ha Noi and its environs enhance Asian tenant pools for Serviced Apartments. The number of small units managed by brand operators has increased.

Matthew Powell, Director, Savills Ha Noi