OPPORTUNITIES FOR TENANTS IN A DOWN MARKET IN A DOWN MARKETIN A DOWN MARKET IN A DOWN MARKET 15 1515 15 th thth th April 2009 April 2009April 2009 April 2009 PRESENTED TO EUROCHAM BY RICHARD LEECH PRESENTED TO EUROCHAM BY RICHARD LEECHPRESENTED TO EUROCHAM BY RICHARD LEECH PRESENTED TO EUROCHAM BY RICHARD LEECH CB Richard Ellis | Page 2 Agenda AgendaAgenda Agenda  Where Are We Now  Hanoi Office Market  Hanoi Serviced Apartment Market  Seizing Market Opportunities inc. Lease Restructuring CB Richard Ellis | Page 3 Internal Conditions & Drivers CB Richard Ellis | Page 4 Where we are now? Where we are now?Where we are now? Where we are now?  The growth environment of early 2008 has changed to cost containment cost containmentcost containment cost containment in 2009  Real Estate costs are often the second largest expense second largest expense second largest expense second largest expense for Companies – typically behind labour  In a contracting economy, an aggressive occupancy cost reduction plan occupancy cost reduction planoccupancy cost reduction plan occupancy cost reduction plan can mean the difference between success and survival  Following headcount reduction activities headcount reduction activitiesheadcount reduction activities 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 rise to new opportunitiesrise to new opportunities rise to new opportunities for restructuring leases  By mid-2008, most Asian markets had achieved record high rents record high rentsrecord high rents 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 rents for new or under construction properties drop rents for new or under construction properties drop rents for new or under construction properties drop 30 to 40% 30 to 40%30 to 40% 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 secure reliable incomesecure reliable income 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 5 Stock Market Rising Stock Market Rising Stock Market Rising Stock Market Rising - -- - 30 Day Trend 30 Day Trend30 Day Trend 30 Day Trend Graph from VNDirect CB Richard Ellis | Page 6 This heat graph shows the individual listings and the color show This heat graph shows the individual listings and the color showThis heat graph shows the individual listings and the color show This heat graph shows the individual listings and the color shows the number of views. s the number of views. s the number of views. s the number of views. Lighter blue is fewer views, darker purple represents more views Lighter blue is fewer views, darker purple represents more viewsLighter blue is fewer views, darker purple represents more views Lighter blue is fewer views, darker purple represents more views. . Web Analytical Data Web Analytical Data Web Analytical Data Web Analytical Data – –– – Heat Graph Heat GraphHeat Graph Heat Graph Apartments for Sale: Jan Apartments for Sale: Jan Apartments for Sale: Jan Apartments for Sale: Jan – –– – Dec 2008 Dec 2008Dec 2008 Dec 2008 Heat Graph provided by MetVuong.com CB Richard Ellis | Page 7 What WhatWhat What’ ’’ ’s driving the office market? s driving the office market?s driving the office market? s driving the office market? Landlord Market Tenants TenantsTenants Tenants Space Options Space Options Space Options Space Options Competitive Competitive Competitive Competitive Market MarketMarket Market Tenants TenantsTenants Tenants Lack of space Lack of spaceLack of space Lack of space Less favourable rental terms Less favourable rental termsLess favourable rental terms Less favourable rental terms Tenants TenantsTenants Tenants Lower Rents Lower RentsLower Rents Lower Rents Time favours Tenant Time favours TenantTime favours Tenant Time favours Tenant Landlords LandlordsLandlords Landlords High Vacancy High VacancyHigh Vacancy High Vacancy Lower Cash flow Lower Cash flowLower Cash flow Lower Cash flow Landlords LandlordsLandlords Landlords Higher Rents Higher RentsHigher Rents Higher Rents High Occupancy (95 High Occupancy (95High Occupancy (95 High Occupancy (95- -- - 100%) 100%)100%) 100%) Time favours landlord Time favours landlordTime favours landlord Time favours landlord Balances Market Tenant Market Landlords LandlordsLandlords Landlords CB Richard Ellis | Page 8 Hanoi Office Market CB Richard Ellis | Page 9 Regional Comparisons Regional ComparisonsRegional Comparisons Regional Comparisons Source: CBRE (Vietnam Source: CBRE (VietnamSource: CBRE (Vietnam Source: CBRE (Vietnam) ) ) ) Change in Office Rents in the Region as at Q4/2008 Change in Office Rents in the Region as at Q4/2008 Change in Office Rents in the Region as at Q4/2008 Change in Office Rents in the Region as at Q4/2008 -30 -20 -10 0 10 20 30 HCMC Hanoi HongKong Singapore Manila Bangkok Jakarta Percentage Change Quarter-on-Quarter Year-on-year CB Richard Ellis | Page 10 Office Rent Cycle Office Rent Cycle Office Rent Cycle Office Rent Cycle – –– – Hanoi Office Market Hanoi Office Market Hanoi Office Market Hanoi Office Market 2005-2008 Q2 2008 Q1/2009 2010-2011 Hanoi City Hanoi CityHanoi City Hanoi City Phase PhasePhase Phase I II I II IIII II III IIIIII III IV IVIV IV [...]... parking, (including rent, utilities, parking, management fee, etc.) management fee, etc.) Monthly Tax Invoice (optional) Monthly Tax Invoice (optional) Monthly Tax Invoice Issued CB Richard Ellis | Page 21 Serviced Apartment Facilities* Available in 100% projects Available in . OPPORTUNITIES FOR TENANTS IN A DOWN MARKET IN A DOWN MARKETIN A DOWN MARKET IN A DOWN MARKET 15 1515 15 th thth th April 2009 April 2009April 2009 April. Competitive Market MarketMarket Market Tenants TenantsTenants Tenants Lack of space Lack of spaceLack of space Lack of space Less favourable rental terms Less favourable