OPPORTUNITIES FOR TENANTS IN A DOWN MARKET

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
CB Richard Ellis | Page 11
Hanoi Office Market Supply 2007 to 2010
Hanoi Office Market Supply 2007 to 2010 Hanoi Office Market Supply 2007 to 2010
Hanoi Office Market Supply 2007 to 2010
Hanoi Office Market - 2007 to 2010
Hanoi Office Market - 2007 to 2010 Hanoi Office Market - 2007 to 2010
Hanoi Office Market - 2007 to 2010
379,000
412,000
622,000
942,000
0
100,000
200,000
300,000
400,000
500,000
600,000

700,000
800,000
900,000
1,000,000
2007 2008 2009 2010
year
sm
Source: CBRE (Vietnam)
CB Richard Ellis | Page 12
Source: CBRE (Vietnam
Source: CBRE (VietnamSource: CBRE (Vietnam
Source: CBRE (Vietnam)
) )
)
Asking rents of Grade A and B
Asking rents of Grade A and BAsking rents of Grade A and B
Asking rents of Grade A and B
AVERAGE ASKING RENTS OF HANOI GRADE A & B
AVERAGE ASKING RENTS OF HANOI GRADE A & B AVERAGE ASKING RENTS OF HANOI GRADE A & B
AVERAGE ASKING RENTS OF HANOI GRADE A & B
OFFICE PROPERTIES 2007 - 2009
OFFICE PROPERTIES 2007 - 2009OFFICE PROPERTIES 2007 - 2009
OFFICE PROPERTIES 2007 - 2009
$0
$10
$20
$30
$40
$50
$60

2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1
US$ psm per month
(incl. service charge and excl. VAT)
Grade A Grade B
CB Richard Ellis | Page 13
Current asking rents
Current asking rentsCurrent asking rents
Current asking rents
*Buildings are not listed in any particular order within rental
*Buildings are not listed in any particular order within rental *Buildings are not listed in any particular order within rental
*Buildings are not listed in any particular order within rental ranges.
ranges.ranges.
ranges.
CURRE N T AS KI N G RE N T S of
CURRE N T AS KI N G RE N T S of CURREN T AS KIN G REN T S of
CURRE N T AS KI N G RE N T S of
MAJO R O F F ICE BUILDIN GS IN HAN O I
MAJO R O F F ICE BUILDIN GS IN HAN O IMAJO R O F F ICE BUILDIN GS IN HAN O I
MAJO R O F F ICE BUILDIN GS IN HAN O I
$30
$35
$40
$45
$50
$55
$60
$65
$70
Sun Red River, Hanoi Tower,
HCOB, Vincom City Tower

Opera Business Center, Asia
Tower, Vietcombank Tower
63 Ly Thai To, Central Building,
Pacific Place, Sun City
$35-$45
$35-$45$35-$45
$35-$45
$55-$60
$55-$60$55-$60
$55-$60
$45-$55
$45-$55$45-$55
$45-$55
CB Richard Ellis | Page 14
Occupancy rates in existing buildings
Occupancy rates in existing buildingsOccupancy rates in existing buildings
Occupancy rates in existing buildings
RECENT HANOI OFFICE MARKET OCCUPANCY STATISTICS
RECENT HANOI OFFICE MARKET OCCUPANCY STATISTICSRECENT HANOI OFFICE MARKET OCCUPANCY STATISTICS
RECENT HANOI OFFICE MARKET OCCUPANCY STATISTICS
90.64%
90.64%90.64%
90.64%98%
98%98%
98%97.3%
97.3%97.3%
97.3%Overall
OverallOverall
Overall
83.37% 97.3% 95.0% Grade B

Grade BGrade B
Grade B
97.91%98.7%99.6%Grade A
Grade AGrade A
Grade A
2009 Current
2009 Current2009 Current
2009 Current2008
20082008
20082007
20072007
2007
Year
YearYear
Year
Grade
GradeGrade
Grade
Source: CBRE (Vietnam
Source: CBRE (VietnamSource: CBRE (Vietnam
Source: CBRE (Vietnam)
) )
)
CB Richard Ellis | Page 15
10,000
10,00010,000
10,000unknown
unknown unknown
unknown
Vinaconex

VinaconexVinaconex
Vinaconex Tower
TowerTower
Tower
12,800
12,80012,800
12,800US$22
US$22US$22
US$22
Plaschem
PlaschemPlaschem
Plaschem Plaza
PlazaPlaza
Plaza
40,000
40,00040,000
40,000Unknown
UnknownUnknown
Unknown
Cau
CauCau
Cau Giay
GiayGiay
Giay New Submarket
New SubmarketNew Submarket
New Submarket
3,000
3,0003,000
3,000unknown
unknownunknown

unknown
Hacinco
HacincoHacinco
Hacinco Complex
ComplexComplex
Complex
18,000
18,00018,000
18,000US$25
US$25 US$25
US$25 –
––
– US$28
US$28US$28
US$28
CEO Tower
CEO TowerCEO Tower
CEO Tower
18,000
18,00018,000
18,000US$25
US$25 US$25
US$25 –
––
– US$28
US$28US$28
US$28
Vinaconex
VinaconexVinaconex
Vinaconex 9

99
9
15,000
15,00015,000
15,000US$20
US$20US$20
US$20-
--
- US$22
US$22US$22
US$22
CMC Building
CMC BuildingCMC Building
CMC Building
6,160
6,1606,160
6,160US$30
US$30US$30
US$30
CDC Building
CDC BuildingCDC Building
CDC Building
23,000
23,00023,000
23,000Approx US$50
Approx US$50Approx US$50
Approx US$50
Capital Tower
Capital TowerCapital Tower
Capital Tower

197,760
197,760197,760
197,760
21,000
21,00021,000
21,000US$35
US$35US$35
US$35
Resco
RescoResco
Resco Building
BuildingBuilding
Building
23,800
23,80023,800
23,800US$60
US$60 US$60
US$60 –
––
– 70
7070
70
BIDV Tower
BIDV TowerBIDV Tower
BIDV Tower
GFA sq.m
GFA sq.m GFA sq.m
GFA sq.m Proposed rent
Proposed rent Proposed rent
Proposed rent

Proposed headline rent & GFA
Proposed headline rent & GFA Proposed headline rent & GFA
Proposed headline rent & GFA –
––
– 2009 new buildings
2009 new buildings2009 new buildings
2009 new buildings
New Hanoi Grade A&B Office Supply
New Hanoi Grade A&B Office SupplyNew Hanoi Grade A&B Office Supply
New Hanoi Grade A&B Office Supply
* The above rentals include Service Charge, exclude VAT
* The above rentals include Service Charge, exclude VAT* The above rentals include Service Charge, exclude VAT
* The above rentals include Service Charge, exclude VAT
CB Richard Ellis | Page 16
Source: CBRE (Vietnam
Source: CBRE (VietnamSource: CBRE (Vietnam
Source: CBRE (Vietnam)
) )
)
Hanoi office market
Hanoi office market Hanoi office market
Hanoi office market –
––
– Net absorption & vacancy rate
Net absorption & vacancy rateNet absorption & vacancy rate
Net absorption & vacancy rate
NET ABSORPTION AND VACANCY RATE OF GRADE A & B
NET ABSORPTION AND VACANCY RATE OF GRADE A & B NET ABSORPTION AND VACANCY RATE OF GRADE A & B
NET ABSORPTION AND VACANCY RATE OF GRADE A & B
OFFICE PROPERTIES

OFFICE PROPERTIESOFFICE PROPERTIES
OFFICE PROPERTIES
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
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
sm
-10%
0%
10%
20%
30%
40%
50%
60%
Net Absorption Vacancy Rate
CB Richard Ellis | Page 17
CB Richard Ellis | Page 18
Hanoi My Dinh New Urban Area office supply in 2008, 2009
Hanoi My Dinh New Urban Area office supply in 2008, 2009Hanoi My Dinh New Urban Area office supply in 2008, 2009
Hanoi My Dinh New Urban Area office supply in 2008, 2009