Many foreign investors consider the current downturn in the local property market an opportunity for them to jump in and stay ahead when the market recovers.
Many developers, particularly those who rely heavily on big loans from banks, are lamenting their current situation in which they cannot clear their stocks as buyers are holding a wait-and-see attitude toward the market.
Under pressure of paying debts, many of them fear that if the gloomy market is not improved, they’ll sooner or later go bankrupt.
However, for foreign investors, this is a good opportunity, despite high interest rates, credit restriction and inflation.
Current difficulties in Vietnam are short term because inflation is one of the things the Government has decided to tackle.
Observing Vietnam from outside, Dyer said the Government was doing necessary measures to reduce inflation, according to Colin Dyer, president and CEO of Jones Lang LaSalle.
Overall, Vietnam and the rest of Asia are on a growth path because rising population and urbanization can keep fueling commercial property markets.
David Lyons, Vietnam Country Head of Jones Lang LaSalle Vietnam, echoed Dyer’s view. He said Jones Lang LaSalle’s global network was recording a positive sentiment from investors, especially foreign ones who are coming into the market to sound out opportunities.
“We are seeing the property cycle in Vietnam now at or near the bottom…foreign investors say it is time to start to come in,” Lyons said.
Both experts reiterated the current difficult situation in the market, saying high interest rates make it hard to access banks’ credit. Across the board, not only development and investment companies but individuals are also seeing funds being dried out.
Given the difficulties, many cash-strapped developers have had to sell their projects and merger and acquisition activities are expected to continue to increase.
For instance, Daibiru Corporation, a commercial property owner and manager, entered into an agreement in late 2011 to acquire a company that owns the 18,000-square-meter grade A office building Saigon Tower on Le Duan Boulevard in downtown HCMC.
The deal is expected to be completed in January 2012.
Jones Lang LaSalle is reaching out its global network to search for potential investors for several projects that it acts as a broker such as the office building Centre Point on
Nguyen Van Troi Street, a multipurpose project named Royal Tower in the urban town Phu My Hung in HCMC’s District 7, and the Lam Son Square in the resort city of Vung Tau.
Lyons said his company was dealing with several international groups for those projects transactions. Most foreign investors come from within the Asian region, including Japan, Korea and Singapore because those investors understand the dynamic market.
Besides, the company is also getting inquiries from American investors. Those potential investors are interested in office buildings as well as industrial and logistic sectors.
Lyons said when more and more international investors were interested in Vietnam, it was the sign that the market has become more mature.
He thus expected the local property market to pick up again from the third quarter of this year.
Dyer seconded his colleague’s view, saying the market downturn was painful for short-term real estate companies and for the whole market, but it forced companies to restructure business and capital.
Office rent continues to drop.
Like other cities in the world, as office rent in HCMC’s central business districts has dropped by half, companies should move in to take advantage of the situation, Dyer said.
Office rent in HCMC is decreasing for 12 consecutive quarters with asking rent staying around US$32 – $43 per square meter for Grade A buildings, $14 – $32 for Grade B and $10 – $25 for Grade C.
According to the research team of Jones Lang LaSalle, current difficult market conditions are forcing some landlords, besides offering rental discounts or other incentives for long-term leasing contracts, to sell all or part of their buildings to recover their capital quickly.
Total net absorption in 2011 reached over 168,000 square meters, a decrease of 9.4 percent year-on-year.
In the last quarter of 2011, net absorption slumped across all grades, especially in Grade C and in suburban areas. This was probably due to office buildings in higher grades that offer attractive facilities, convenient locations, and increasingly competitive rents.
At the end of 2011, the market saw no new supply, thus the total stock of all grades in HCMC remained stable at over 1.3 million square meters. With more than 40 projects currently under construction with over 558,000 square meters, the total stock in HCMC is expected to double by the end of 2015.
Jones Lang LaSalle projected that this new level of supply would increase the vacancy rate in the HCMC office market, and thus rent could remain low in 2012.
No comments:
Post a Comment