Vietnams real estate market has attracted many foreign investors. On his visit to Hanoi last week, VIR talked with Arsh Chaudhry, executive managing director of Cushman&Wakefield Southeast Asia, about his assessment of Vietnams real estate market.
* Your visit this time came after the last trip of Asia-Pacific executive managing director of Cushman&Wakefield (C&W) Vietnam Sanjay Verma seems to prove C&Ws concern about the Vietnamese markets gloomy status. Should it be understood that Vietnam needs special care from C&W Southeast Asia?
The two visits are not connected. Our CEO visited Vietnam last month as he had not been here for a while and he was keen to meet with our staff, our clients and discuss growth strategies for the future. In my role as executive managing director for South East Asia, I visit all our South East Asia offices at least once a month. The same is true for Vietnam. We are committed to the growth of our business in Vietnam and while the current economic conditions are tough for all businesses, we are excited at the medium to long term prospects that the market has to offer.
* What are some common strengths and weaknesses of real estate markets in the region? How do you assess Vietnams real estate market to other markets and in particular to Indonesia where policies for real estate investment are now very open and appealing to foreign investors?
Every market is different and has it nuances. In 2011, the Singapore office market saw tremendous demand take up of circa 200,000 square metres. This was on the back of pent up demand from 2009 and 2010. 2012 will see demand closer to 80,000-100,000sqm, hence rents will be soft. Jakarta on the other hand is a rising market lead by strong demand which is coming from across various industries: oil and gas, banking and finance and fast moving and consumer goods in particular.
Vietnam on the other hand saw rents sky rocketing to $80-100sqm in 2007 and 2008 and are now hovering in the mid 30s for Grade A office. These rents are more realistic for the market and comparable to rents in Malaysia and Indonesia.
In my opinion, comparing Vietnam to Indonesia doesnt offer a like-for-like comparison. Indonesia is the fourth largest country in the world after China, India and the US, with a population of nearly 250 million with a growing middle class that is getting more affluent by the day. Unlike Singapore or Hong Kong, due to the sheer population size Indonesias economy is a domestic consumption based growth story.
Though a few years behind in the economic growth maturity curve, Vietnam has the same ingredients for growth large population base of nearly 88 million with nearly 70 per cent between the age of 15-59 years. The fact that it is a low cost manufacturing base and a strong alternate location to China, its strategic location in Asia, the growing middle class that is consuming and urbanising quickly.
* What can we learn from other markets to improve Vietnams market?
Any savvy investor understands the concept of risk and return. Strong monetary and fiscal policies are needed to keep the VND steady. The rate is between the VND and the US dollar is a separate issue. The bigger issue is that it should not fluctuate too much. Interest rates and inflation also need to be in check. All this coupled with transparency and a level playing field will attract foreign investors.
* As said above, Vietnam is challenging. How has this impacted on C&Ws business?
No doubt the market is challenging. With rising interest rates, home sales have slowed and this has affected our residential business. However, we have gained market share in the office leasing sector as we have created a niche for ourselves in advising both tenants and landlords. We see a lot of opportunity in capital markets, project management, consulting and valuations.
* Some people may think that it is wiser to focus on Indonesias real estate market where the conditions are more favourable, does it mean that in some case Vietnams market be ignored? So then what is C&Ws growth strategy for Vietnam and Hanoi in short and long terms?
Our brand, Cushman & Wakefield, was set up in 1917. For the last 95 years, we have traded as Cushman & Wakefield. No other real estate firm can claim that. When we enter a market, we do so for the long term. When markets are slow, it does not mean that they should be ignored instead business strategies need to be aligned to suit the market conditions and should be set up such that when things do improve, we are geared to derive maximum opportunity. We are in Vietnam because our clients are here. We will continue our focus in Vietnam and plan to grow from strength to strength over the years.
Source: Vietnam Investment Review