Boston, MA -- (ReleaseWire) -- 04/30/2014 -- We are increasingly positive regarding the long-term strength of Vietnam's commercial real estate sector. Although we are expecting some softness to continue in the market in the short-term, due to oversupply in some sectors and cities, in the long term the strength of the country's economy and manufacturing base, as well as its youthful demographic, will drive the commercial real estate market. Various factors combine to mean that we are optimistic for Vietnamese commercial real estate in the long term. Firstly, the economy is now on a firmer footing, with growth of 5.9% forecast for 2014, and this will provide a healthier environment for commercial real estate investment. Secondly, we expect increased foreign direct investment into the country, and into the real estate sector. Draft legislation currently under consideration would make it easier for foreign investors to buy property in the country.
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We are expecting demand for Vietnamese exports to pick up, particularly boosting the industrial and office real estate sub-sectors, while the country's young and increasingly urbanised population will ensure continued strong demand for high quality retail real estate.
Meanwhile, the central bank has relaxed interest rates in mid-2013, and we see them remaining stable over our forecast period to 2018.Efforts to reduce capital controls and lending restrictions have met with mixed success as the government continues its efforts to attract foreign investment through industrial park (IP) and Economic Zone (EZ) development.
While office and industrial rents have remained low through 2013, demand for retail space has outstripped supply and has outperformed other sectors as an increasingly middle income urbanised class boosts overall consumption rates. Top priorities through 2014 will be economic, increasing GDP growth and attracting more diversified sustained investment, as the market continues to relax restrictions on property and firm ownership.
- There has been limited activity in the office real estate market over the past few months. In mid2013 the Center Point building in Phu Nhuan was sold, while later in the year the Gemadept building also changed hands. Both properties are in Ho Chi Minh City.
- Vingroup opened to large-scale malls in Hanoi in 2013, Vincom Mega Mall Times City and Vincom Mega Mall Royal City, the largest mall in Vietnam. Meanwhile, MGR expansions continued throughout 2013, with Son Ha and Ocean Retail among those opening new stores.
Key BMI Forecasts
- We are forecasting that rental rates for office real estate in Hanoi will fall by 5% in 2014, while we see a more significant fall, of between 5% and 10%.
- We see office and retail rental costs remaining static in Da Nang in 2014.
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