Office Grade A

1. Supply 1.1. Supply in Overview

With the new opening of Time Square and Lim Tower in 2013, H ! cit" now ha# tota$ 10 grade A office %ui$ding# operating with a tota$ $ea#a%$e area of 1&' thou#and #qm, a$$ i# $ocated in (i#trict 1) After 10 "ear# $ac*ing of new #upp$", within + "ear# from 200,, the #upp$" of Grade A office #pace ha# increa#ed #ignificant$" than*# to the comp$etion of -umho A#iana .$a/a, 0ite1co 2inancia$ Tower, .re#ident .$ace, Time Square and Lim Tower a# the $ate#t) List of Grade A buildings and Occupancy to Q3/2 13 !o "uilding na#e 1 2 3 + 4 3 ' & , 10 Saigon )entre Saigon *ower Sunwa+ *ower *+e ,etropolitan -ia#ond .la/a 0u#+o Asiana .la/a "ite1co $inancial *ower .resident .lace *i#es S&uare Li# *ower *otal supply !$A %s&#' 11)340 13),40 20)&00 14)200 14),33 23)000 3')'10 &)323 ,)000 2,)234 123.233 Source6 Occupa ncy %(' ,1,&45 ,,,005 ,',+05 ,,,015 100,005 ,&,005 &4,005 ,1,,,5 30,005 '4,005 2456 (

o$$ier# 7ietnam

The new #upp$" #hou$d ha8e %een much $arger if it hadn9t %een for the econom" cri#i# #tarting in 200,) A $ot of rea$ e#tate pro:ect# con#tructed at the pea* time from 2003 to 200& to catch the o8erwhe$ming need# had to de$a" or #top con#tructing due to the %$a#t of rea$ e#tate %u%%$e in 200,) There were p$ent" %ig pro:ect# with e1perienced de8e$oper# cou$d manage to comp$ete at thi# time) Howe8er, the" faced with other i##ue, $arge #upp$" coming to the mar*et at the #hort time had decrea#ed the price #ignificant$" in grade A office)

2rom 200, to 2013, the tota$ #upp$" of Grade A office ha# increa#e 1+25 comparing to the "ear 200&)

1.2.

$luctuation of Occupancy and As7ing .rice

.$ent" of new #upp$" of Grade A coming to the mar*et in the #hort time had decrea#ed %oth the occupanc" rate and renta$ fee from 200,) !ea#ure6 Thou#and Sqm

With the #upp$" of on$" '')4 thou#and #qm of Grade A office #tood #ti$$ from 1,,,, the mar*et #uffered huge demand #hortage from 200+) The occupanc" rate #ta"ed at the highe#t from 200+ to 200& had cau#ed the a#*ing price :ump cra/i$" from 31 ;S( to '2 ;S( per #qm in 200') Occupanc" rate and a#*ing price were quic*$" coo$ed down when the g$o%a$ cri#i# #tarted affecting 7ietnam and the new #upp$" of -umho A#iana .$a/a, 0ite1co 2inancia$ Tower) Occupanc" rate had p$ummeted to the $owe#t of '05 and a#*ing price went %ac* to the range 34 to +0 ;S( per #qm in 2010) Howe8er, the $ower price# had cau#ed the more increa#ing demand for grade A office #pace) The Occupanc" rate and a#*ing price maintained #ta%$e at around &45 < ,05 and 34 = 3, ;S(> month from 2011 de#pite new #upp$")

!ea#ure6 5> ;S( Source6 o$$ier# 7ietnam

?n @3 2013, the occupanc" rate of Grade A office #pace ha# c$im%ed to &,)35 pro8iding that the new #upp$" to the mar*et ha# reached 30,000 #qm in @2>2013) The tota$ grade A office #pace $eft wa# 20)000 #qm in @3, meanwhi$e actua$ tran#action for grade A #pace

in @3 wa# 12)000 #qm) Tho#e pro8e# that the need# for grade A office #pace wa# $e## $i*e$" to %e much affected %" the economic downturn and i# fa#t growing in $ine with the reco8er" of the econom")

1.3.

$uture Supply to 2 18

A# $ong with increa#ing need# for Grade A #pace, $imited future #upp$" i# other factor to e1pect the price wi$$ going high) urrent$", there are 20 grade A, 0A office pro:ect# $icen#ed and e1pected to %e comp$eted to 201& in the 0() Howe8er, on$" 12 pro:ect# are more $i*e$" to fini#h on time and 4 of them wi$$ comp$ete in 201+ with 2 %ui$ding# wi$$ %e u#ed for the de8e$oper9# purpo#e) List of Grade A5 " office building are underconstructing and will be co#peted to 2 12 in t+e )"-.
"uilding !a#e 1 3 + Le !eridien 7ietcom% an* Tower Saigon One Tower BSaigon !C D 7ietin 0an* Tower )T .$a/a 41 0en huong (uong BHu%aD Saigon enter .ha#e 2 The One Ho hi !inh it" Address 3 Ton (uc Thang 4 !e Linh Sq Ton (uc Thang ,3<,4 Ham Eghi 22 7o 7an -iet B41 0en huong (uong cuD 34 Le Street Loi -istric t (i#trict 1 (i#trict 1 (i#trict 1 (i#trict 1 (i#trict 1 )o#pl etion 9ear 201+ 201+ 2014 Status ;nder on#truction ;nder on#truction (e$a" G$A ,)000 44)000 +,)44 + 20)00 0 3&)3, ' !$A 3)'40 A +1)24 0 3')13 3 14)00 0 2&)', & 0 (i#trict 1 (i#trict 1 2014 201& ;nder on#truction ;nder on#truction +0)00 0 4&)00 0 30)00 0 +3)40 0 A A A

4 3

201+ 2013

;nder on#truction ;nder on#truction

& ,

10

11

!ap$e Tree .$a/a BSa%eco Wor$d Trade enterD !0 Sunn"

a$mette, Le Thi Hong Gam, .ho (uc hinh and .ham Egu Lao 2<+<3 Hai 0a Truong Street

(i#trict 1

201&

.$anning Stage

3&)&0 0

2,)10 0 A

24,

Tran

(i#trict

201+

omp$etion

1')30

13)20

Tower 12 Saigon Giai .+ong !ewspap er Office "uilding

Hung Street

(ao

+32<+3& Egu"en Thi !inh -hai

(i#trict 3

201+

;nder on#truction

13)3, 2

12)2, +

Source6

o$$ier# 7ietnam

Si1 out of 12 a%o8e are rated a# Grade A office %ui$ding with the tota$ E2A of 1&')000 #qm wi$$ %e added to the mar*et %" 201& increa#ing 1005 compared to 2013) Le !eridien, 7ietcom%an* Tower, Sai Gon !C and Sai Gon Trade center are e1pected to %e comp$eted %" 2014 with tota$ of 114)000 #qm of new #pace, howe8er the new E2A wi$$ on$" %e 30)000 #qm %ecau#e the 7ietcom%an* Tower wi$$ %e not a8ai$a%$e for $ea#e)

Source6

o$$ier# 7ietnam

Limited new #upp$" of 30)000 #qm in the ne1t 2 "ear wi$$ definite$" dri8e the price go up) ?n the ne1t 3 more "ear#, with '0)000 #qm new E2A wi$$ increa#ing the tota$ #upp$" to 3'+)000 #qm of Grade A #pace in 201,) Thi# wou$d %e the hum%$e num%er comparing with 1)2 mi$$ion #qm grade A #pace right now of our mo#t demographic< $i*e neigh%orhood, 0ang*o*)

2. -e#and Side 2.1. -e#and Analysis

?n @3>2013, actua$ tran#action for grade A #pace ha# reached 12)000 #qm, 2005 increa#ing qo" and price ha# increa#e #$ight$" at 35 qoq) Occupanc" from %oth grade A and 0 ha# #$ight$" decrea#ed due to new #upp$") .rice i# going up in tho#e %ui$ding# which ha# high occupanc" rate, meanwhi$e, i# #ta%$e with Grade A< and 0A)

Source6

o$$ier# 7ietnam

(emand for grade A ha# con#tant$" increa#ed in the $a#t 10 "ear#) (emand wa# #tuc* in 2003 and 2003 due to the $ac* of #upp$" and %oo#t price to the highe#t with '2 ;S(> #qm in 200') ?n 200&, demand wa# decrea#ed #$ight$" %ecau#e the price went too high and #ome tenant# mo8ed to new grade 0 or 0A office) Howe8er, demand wa# quic*$" catching up pace de#pite the cri#i# effect# with the increa#e of 1235 from 200& to 2013 due to $ower price and new #upp$", comparing with 1+25 increa#e in #upp$" at the #ame period) We can #ee price and demand had %een negati8e corre$ati8e %efore 200& a# price went up, demand went down and 8ice 8er#a) Howe8er, con#idering the 200, = 2013 period, we cou$d rea$i/e that %oth price and demand are rapid$" going up and that i# the #igna$ of future #upp$" #hortage)

Ana$"/ing and comparing Grade A with the trend# in demand for grade 0 #pace, we can ea#i$" notice that the demand trend# for Grade A #pace remain# #ta%$e and $e## affected regard$e## of economic downturn (emand for Grade A #pace increa#ed #ignificant$" in the %eginning of 2000# %ecau#e of the growth in commercia$ acti8itie# and 8ariou# #upp$") Howe8er, when the econom" grew at the fa#te#t pace %etween 200+ and 200', the demand for grade 0 #eemed to much #$ow down with #$ight growth whi$e the need# for Grade #pace wa# at pea* %ut the demand wa# #tuc* due to #upp$" #hortage)

Source6

o$$ier# 7ietnam

2rom 200' to 2010, the price for Grade A wa# too high and the econom" wa# #e8ere$" affected %" the g$o%a$ cri#i#, Grade 0 office %ecame much afforda%$e for the tenant# and #o the demand #tarted to grow fa#t again) Howe8er, when the econom" appeared to ha8e #ome reco8er" #igna$# from 2011, grade 0 demand wa# once again #$owing down) ?n the meantime, de#pite the econom" downturn, demand for grade A wa# increa#ing con#tant$" from 200, and i# e1pected to grow fa#t when the econom" reco8ered) Tho#e indicate# that (emand for Grade Space i# $e## $i*e$" to %e much affected in the econom" cri#i# %ut growing fa#t when the econom" #ta%$e and growing) ?n thi# ca#e, the trend $ine# #how that demand for Grade i# going up whi$e for Grade 0 wi$$ %e decrea#ing)

2.2.

$actors Affecting !eeds

Key macro factors

G(. inde1 and Growth in Ser8ice #ector are con#idered the mo#t affecting factor# to the demand for office #pace) G(. indicate# the pro#pect of the countr" in genera$, whi$e growth in Ser8ice #ector indicate# the need# for office #pace %ecau#e mo#t #er8ice acti8itie# happen# in#ide the office p$ace)

Source6 7neconom" G(. growth reache# 4)35 in 2013 and i# e1pected to grow around 4)45 to 35 in 201+ and 2014) AEF and ?2! a$#o foreca#t the 7ietnam econom" wi$$ #trong$" reco8er from 2013 with G(. growth at '5, the highe#t from 200&) Tho#e indicate# that the %u#ine## acti8itie# acro## the countr" and e#pecia$$" in Ho hi !inh cit" wi$$ %e 8er" d"namic then)

Source6 H ! cit" #tati#tica$ office The #er8ice #ector of H ! i# a$#o on trac* of growing with #ta%$e pace in the $a#t decade de#pite #$ight$" drop during the economic cri#i#) ?t grow# at the a8erage of 105 in 2000 = 2003, 135 in 200+ = 200&, and 10)45 in 200, = 2013, which i# a$wa"# a8erage 45 higher than the countr" num%er#, account# for more than ha$f of the cit" G(. #tructure and i# e1pected to continue growing #trong when the reco8er" #igna$# are c$earer) Tho#e e1p$ain# the gradua$$" increa#ing in need# for office #pace genera$$" and Grade A office #pace in #pecific) !an" economi#t#, financia$ in#titution# and po$ic" ma*er# foreca#t the 7ietnam econom" wi$$ %e #ta%$e in the ne1t 2 "ear# to prepare for #trong reco8er" in 2013 and the #er8ice #ector wi$$ more and more #ignificant$" contri%ute to the G(. #tructure, we can e1pect the outcome of #trong$" increa#ing need# in Grade A office #pace)

2.3.

:ncreasing -e#and fro# current tenants

!r#) Go#e, o$$ier# A##ociate (irector and Lea#ing manager at -umho A#iana .$a/a comment# that de#pite the occupanc" i# a$wa"# at near$" fu$$ capacit" and the renta$ fee i# 14 = 205 higher in premium grade A %ui$ding# #uch a# -umho A#iana .$a/a, (iamond .$a/a, The !etro.o$itan, Saigon Tower, Sunwah Tower, tenant# *eep a#*ing for more #pace and of cour#e the" can9t find $arger #pace with $imited current #upp$") !ore and more tenant# are #tuc* to e1pand their %u#ine## a# we$$ a# mo8e from grade 0 to grade A %ecau#e the" can find qua$it" grade A $ea#ing #pace) Among 122 office tran#action# in Eo8em%er, more than + out of 10 i# $oo*ing for e1pan#ion) Late#t #ur8e" in Optimi#m a%out 7ietnam9# economic out$oo* o8er the ne1t 12 month# re$ea#ed %" Grant Thorton 7ietnam #how# that near$" ha$f of the re#pondent#, name$" +35, had %right 8iew# on 7ietnam9# economic pro#pect# comparing with on$" 2'5 in @+>2012, the negati8e out$oo* had a$#o dec$ined 415 from @2>2013 to on$" 135) .articu$ar$", +3 percent of the re#pondent# #aid the" p$an to increa#e their in8e#tment in the countr") 2urthermore, in the $a#t 11 month#, the tota$ 2(? capita$ attracted ha# reached ;SH20)& %n, increa#ed 4+)25 "o") Such re#u$t# are #trong indication# a%out in8e#tor#9 confidence i# gradua$$" coming %ac*) We can e1pect that when the" increa#e in8e#ting in the countr", tho#e of the mo#t %a#ic in8e#tment# wou$d %e hiring more peop$e and therefore, e1panding office p$ace)

With #uch promi#ing #igna$# a%out %etter economic reco8er", increa#ing office need#, #tronger po#iti8e out$oo*, renta$ fee for Grade A office #pace i# foreca#ted to increa#e 35 < 45 in 201+)

3. )onclusion
(emand and price in Grade A #pace i# at the growing trend# indicate the #hortage in #upp$") With $imited new #upp$" comparing with the cit"9# pro#pect and capacit" in the ne1t 4 "ear# com%ining with coming %ac* confidence from in8e#tor# and fa#te#t rate reco8er" in 2013 #ince rece##ion, the grade A office mar*et i# %e$ie8ed to #uffer from office #pace deficit and therefore, the price in Grade A wi$$ e8entua$$" :ump up a# it wa# in 2003) The #tud" a$#o #how that the

e1pan#ion proce## i# #tuc* due to the $ac* of qua$it" #pace and therefore the mar*et i# facing with the increa#ing need# for higher qua$it" #er8ice with $arger #pace of Grade A office %ui$ding) o$$ier# %e$ie8ed 201+ and 2014 wi$$ %e :u#t the right time to de8e$op high qua$it" grade A office #pace with $arge f$oor #pace to meet current need# and catch the e1p$oding demand in 2013 < 201&)