Thu Thiem the Pudong of Saigon

THU THIEM THE PUDONG OF SAIGON

CBRE Global Research

© CBRE Ltd. 2015 1 THU THIEM Over the past 300 years HCMC has grown from a small riverbank settlement into a bustling city of over eight million inhabitants. The development of Thu Thiem is now taking shape to create a new financial and economic centre for the city.

2 HCMC | Thu Thiem - The Pudong of Saigon THU THIEM Over the past 300 years HCMC has grown from a small riverbank settlement into a bustling city of over eight million inhabitants. The development of Thu Thiem is now taking shape to create a new financial and economic centre for the city.

Executive Summary Located across the Saigon River from District 1 and 05 possessing a huge land bank of 657 hectares, Thu Thiem is to be redeveloped as a new centre of HCMC. Introduction 06 Planning for the Thu Thiem New Urban Area began as early as 1996. However, to date only a tunnel and a bridge have been completed to connect Thu Thiem to the rest of the city. About Thu Thiem Four other bridges and a metro link are still either Location under-construction or under planning. Land Information 09 Why Thu Thiem? Land-Use Plan More than 99% of land in the district has already been cleared Building Height Plan with a total compensation cost of about US$800 million. Land Allocation Infrastructure By the end of 2014, 2,460 of a total of 123,500 resettlement apartments had been completed and handed over. 20 Major Approved Projects In July 2015, the first residential project was launched in Thu High-end Condominium Thiem by local group Dai Quang Minh at a selling price of 22 Price Comparison US$2,000 to 2,800 per sq. m., marking a new milestone in the development of the area. What is holding back A number of challenges remain for investors, including the lack Thu Thiem? 24 of properly developed infrastructure and high land prices. Opportunities Challenges 26 Pudong Case Study Lessons Learnt 32 from Pudong

Conclusion and References 34 CBRE GLOBAL RESEARCH This report was prepared by CBRE Vietnam Research Team, which forms part of CBRE Global Research—a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate.

© CBRE Ltd. 2015 Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

4 HCMC | Thu Thiem - The Pudong of Saigon CONTENTS EXECUTIVE SUMARY

© CBRE Ltd. 2015 5 INTRODUCTION HCMC is set to continue to hectares expand at a rapid rate and the 657- development of Thu Thiem will oﬀer permanent foreign investors myriad opportunities. 145,500 - residents

hu Thiem is a 657 hectare site transformation of Thu Thiem into an lakeside road, a riverside road and a and will feature an 86 storey located in District 2, on the international financial and 12 km long flyover. Work is structure, one of the tallest in South opposite side of the Saigon commercial centre. When scheduled to finish within the next East Asia, in addition to a high-end T River from District 1 and the development is complete, Thu Thiem 36 months. shopping mall, a 5-star hotel, Central Business District. Even will have a resident population of offices, serviced apartments and though it is relatively close to the 150,000 and a daily working In July 2015, local developer Dai underground parking. centre of HCMC, Thu Thiem is population of 220,000. Links to other Quang Minh launched the first largely a Greenfield site and until parts of HCMC will include a tunnel residential project in Thu Thiem at As HCMC continues to expand, the recently has had little connection (now completed), four road bridges prices ranging from US$2,000 to development of Thu Thiem will offer with the rest of the city. (one already completed), a US$2.800 per sq. m., marking a new significant opportunities in pedestrian bridge, a metro link and milestone in the development of construction and real estate and as a Thu Thiem was identified by the HCMC’s existing waterway network. Thu Thiem. location for business growth. Vietnamese government as a key However, the pace of development to potential development area for a new The first bridge linking Thu Thiem to The most visible new structure in date has not met expectations, Central Business District in 1996. Binh Thanh District opened to traffic Thu Thiem will be the part of the mainly due to infrastructure and The plan envisages a sustainable, in 2008, but it was not until the 14.5 hectare Empire City Project high land prices. mixed-use project that incorporates opening of the Thu Thiem tunnel in which was recently approved. The commercial and residential areas in 2011 that Thu Thiem truly became project will be developed by a joint This report examines the addition to schools, offices and open accessible from existing parts of the venture between Tien Phuoc JSC., opportunities that Thu Thiem will public spaces. HCMC downtown area. Tran Thai Co. Ltd., Denver Power offer as well as the challenges that it Ltd (UK) and GAW Capital Partners. must overcome in order to establish US architecture firm Sasaki Work on internal roads within the It will be located directly opposite itself as the new centre of HCMC. Associates was commissioned in Thu Thiem area began in 2014. the existing HCMC downtown area 2003 to produce a plan for the When complete, these will include a

6 HCMC | Thu Thiem - The Pudong of Saigon INTRODUCTION HCMC is set to continue to hectares expand at a rapid rate and the 657- development of Thu Thiem will offer permanent foreign investors myriad opportunities. 145,500 - residents hu Thiem is a 657 hectare site transformation of Thu Thiem into an lakeside road, a riverside road and a and will feature an 86 storey located in District 2, on the international financial and 12 km long flyover. Work is structure, one of the tallest in South opposite side of the Saigon commercial centre. When scheduled to finish within the next East Asia, in addition to a high-end T River from District 1 and the development is complete, Thu Thiem 36 months. shopping mall, a 5-star hotel, Central Business District. Even will have a resident population of offices, serviced apartments and though it is relatively close to the 150,000 and a daily working In July 2015, local developer Dai underground parking. centre of HCMC, Thu Thiem is population of 220,000. Links to other Quang Minh launched the first largely a Greenfield site and until parts of HCMC will include a tunnel residential project in Thu Thiem at As HCMC continues to expand, the recently has had little connection (now completed), four road bridges prices ranging from US$2,000 to development of Thu Thiem will offer with the rest of the city. (one already completed), a US$2.800 per sq. m., marking a new significant opportunities in pedestrian bridge, a metro link and milestone in the development of construction and real estate and as a Thu Thiem was identified by the HCMC’s existing waterway network. Thu Thiem. location for business growth. Vietnamese government as a key However, the pace of development to potential development area for a new The first bridge linking Thu Thiem to The most visible new structure in date has not met expectations, Central Business District in 1996. Binh Thanh District opened to traffic Thu Thiem will be the part of the mainly due to infrastructure and The plan envisages a sustainable, in 2008, but it was not until the 14.5 hectare Empire City Project high land prices. mixed-use project that incorporates opening of the Thu Thiem tunnel in which was recently approved. The commercial and residential areas in 2011 that Thu Thiem truly became project will be developed by a joint This report examines the addition to schools, offices and open accessible from existing parts of the venture between Tien Phuoc JSC., opportunities that Thu Thiem will public spaces. HCMC downtown area. Tran Thai Co. Ltd., Denver Power offer as well as the challenges that it Ltd (UK) and GAW Capital Partners. must overcome in order to establish US architecture firm Sasaki Work on internal roads within the It will be located directly opposite itself as the new centre of HCMC. Associates was commissioned in Thu Thiem area began in 2014. the existing HCMC downtown area 2003 to produce a plan for the When complete, these will include a

Location Land Information Why Thu Thiem? Land-Use Plan Building Height Plan Land Allocation Infrastructure

8 HCMC | Thu Thiem - The Pudong of Saigon ABOUT THU THIEM

Location Land Information Why Thu Thiem? Land-Use Plan Building Height Plan Land Allocation Infrastructure

Thu Thiem is situated in District 2 across the Saigon River from District 1.

DISTRICT 12 1A

HO CHI MINH CITY 1A THU DUC DISTRICT GO VAP DISTRICT

0 1 2 5 10 km

TAN SON NHAT INTERNATIONAL AIRPORT DISTRICT 9

BINH THANH TAN BINH DISTRICT DISTRICT DISTRICT 3 Nguyen Duy Trinh

East-West Highway DISTRICT 2 DISTRICT 10 1A THU 10 DISTRICT DISTRICT 11 1 THIEM

National Highway DISTRICT DISTRICT 6 7

District Boundary DISTRICT 4 Vo Van Kiet

DISTRICT 8

Nguyen Van Linh

Nguyen Huu Tho

Village Road 19

HCMC - Trung Luong Expressway

HCMC | Thu Thiem - The Pudong of Saigon LOCATION 13

Thu Thiem is situated in District 2 across the Saigon River from District 1.

DISTRICT 12 1A

HO CHI MINH CITY 1A THU DUC DISTRICT GO VAP DISTRICT

0 1 2 5 10 km

TAN SON NHAT INTERNATIONAL AIRPORT DISTRICT 9

BINH THANH TAN BINH DISTRICT DISTRICT DISTRICT 3 Nguyen Duy Trinh

East-West Highway DISTRICT 2 DISTRICT 10 1A THU 10 DISTRICT DISTRICT 11 1 THIEM

National Highway DISTRICT DISTRICT 6 7

District Boundary DISTRICT 4 Vo Van Kiet

DISTRICT 8

Nguyen Van Linh

Nguyen Huu Tho

Village Road 19

HCMC - Trung Luong Expressway

7,563,750 sq. m. WHY THU THIEM?

The development of Thu Thiem oﬀers an TOTAL GFA (UPPER GROUND) opportunity to connect the eastern bank of the river with the rest of the city.

TOTAL hu Thiem enjoys a strategic location across the Saigon River from District 1 TOTAL Thu USABLE and possesses a large land bank. It is these attributes that prompted city ha LAND LAND ha 657 AREA 216 master planners to identify the area as an ideal location for the development Thiem AREA Tof a new ﬁnancial, commercial and residential centre for HCMC. Source: www.thuthiem.hochiminhcity.gov.vn Source: Thu Thiem also acts as a link between existing areas of the city and new developments to the east, including the city’s planned new international airport. The area is ideally located at the southern terminus of National Highway No. 1, the main road transport link which runs from Hanoi in the North to HCMC in TOTAL GFA (UNDERGROUND) the South. Similar to Pudong’s location in Shanghai, Thu Thiem occupies a large peninsula formed by a meander in the Saigon river. This area on the East side of the river includes almost 8.5 km of river frontage which is mainly used for commercial and transportation activity. The river is heavily 2,220,079 sq. m. polluted in places and the river frontage currently houses a number of unsightly industrial facilities and storage areas. As Thu Thiem is developed, this area will be transformed into an important residential, working and recreational amenity for the city. The Saigon river is a tidal river characterised by diurnal tides. Thu Thiem is fully integrated into the hydrological cycle of the river, acting locally both as a water ﬁlter and a receiving area for river water. While it is accepted that current levels of pollution in the Saigon River must be addressed at a regional level, it is believed that the development of Thu Thiem will help create Residential Space Commercial Space Land Efficiency Ratio a new perception of the centre of HCMC as an attractive, riverfront area. This will help to reinforce the image of 3,823,055 3,339,285 3.5 HCMC as a desirable world-class metropolis. sq. m. sq. m. The Pudong model that Thu Thiem attempting to follow has enjoyed remarkable success over the past decades, which is encouraging HCMC authorities to accelerate their plans to develop the area.

Number of Apartment Height Restriction Land Price - Approx. US$ 26,618 86 2,500-3,500 units storeys sq. m.

12 HCMC | Thu Thiem - The Pudong of Saigon LAND INFORMATION

7,563,750 sq. m. WHY THU THIEM?

The development of Thu Thiem oﬀers an TOTAL GFA (UPPER GROUND) opportunity to connect the eastern bank of the river with the rest of the city.

Number of Apartment Height Restriction Land Price - Approx. US$ 26,618 86 2,500-3,500 units storeys sq. m.

Central Square’s Border Cultural Sites Central Park 4 Floors (16 m) 25 Floors (100 m) Commercial School Entertainment/Education 6 Floors (24 m) 30 Floors (120 m) Commercial Mixed-use Software Park Paludology 10 Floors (40 m) 40 Floors (160 m) Residential Mixed-use Administration Sites Central Square 15 Floors (60 m) 50 Floors (200 m) Residential – High-density Medical Centre Waterway 20 Floors (80 m) 86 Floors (344 m)

Source: Urban Design Guideline by Sasaki Associates (USA) Source: Urban Design Guideline by Sasaki Associates (USA)

14 HCMC | Thu Thiem - The Pudong of Saigon LAND-USE PLAN 0 100 200 400 m BUILDING HEIGHT PLAN 0 100 200 400 m Thu Thiem NUA’s Border Residential – High-density Urban Service Sites Project Site Boundary

Source: Urban Design Guideline by Sasaki Associates (USA) Source: Urban Design Guideline by Sasaki Associates (USA)

lots 1 and 2 in Thu Thiem face the existing city centre (District 1 of HCMC) and have therefore been identified as the core of the new urban area. These two plots will be developed as the financial and commercial heart of Thu Thiem and will comprise high-density office towers, commercial developments and public spaces such as the Central Plaza and the Crescent RiverfrontP Park. The main focal point of this area will be the tallest building in HCMC which will serve as an iconic feature of the city’s skyline. There will also be a large square in the centre of this core area containing indoor and outdoor arenas and recreation spaces. In June 2015, a consortium of two local firms Tien Phuoc Real Estate JSC and Tran Thai Real Estate Co. Ltd. and Denver Power Co. Ltd., a member of UK-based Gaw Capital Partners received an investment certificate to develop Plot 2b worth US$1.2 billion. The 15-ha area, known as the Empire 4 7 City Complex, will consist of an 86-storey building, a five-star hotel, a shopping mall and an office building. 3 In 2014 South Korean conglomerate Lotte and its Japanese partners (Mitsubishi and Toshiba) received in-principal approval to develop Plot 2a worth US$2 billion. The Eco Smart City development is expected to feature luxury trade centres, hotels, office buildings, and apartments on across an area of 10 hectares. The second main area of Thu Thiem will be the East/West Boulevard consisting of Plots 5 and 6. This area provides a gateway to Thu Thiem from both District 1 and District 2 and will be home to stations on the metro line that will run from District 1 to Thu Thiem. Plots 5 and 6 will be reserved for various 1 types of residential development as well as supporting facilities such as schools, medical centres and parks. Building height in this area will range from three to sixteen storeys. Under an agreement with Thu Thiem Authority, the whole land area of these two plots is to be given to 6 Dai Quang Minh Real Estate Investment JSC, a local company, in exchange for it investing in infrastructure systems in Thu Thiem including building four major roads, the Thu Thiem 2 Bridge and a pedestrian bridge.(1) 2a The company plans to develop an 80-hectare residential area near the southern section of the Mai Chi Tho Road (the existing main road that runs from Thu Thiem Tunnel through the site to District 2), and a 20-hectare area with 11 plots of land near the northern section of the road. According to the plan, the company will also build another urban area near a 150-hectare southern ecological forest area on the 5 (2) peninsula, including 234 villas, 395 houses, 5,600 luxury apartments, a five-star hotel and a hospital. 2b In early Q3 2015, the first 414 Sarimi apartments and 178 Saroma villas of Sala Thu Thiem are under-construction and have been launched for sale. The developer is also planning to launch the next condominium blocks named Sarica and Sadora. This is also the only project that is currently 2c under-construction in Thu Thiem. The “Core Area” of Thu Thiem is Neighbourhood #7 includes the divided into two neighbourhoods Eastern Residential development, known as #1 and #2 (2a, 2b, 2c) Urban Resort Hotel and Marina

8 The Northern residential area Neighbourhood #8 consists of neighbourhoods encompasses the entire #3 and #4 Southern Delta area

The residential areas along the Mai Chi Tho Boulevard are shown as #5 and #6 respectively

(1) See Infrastructure Map page 20-21 (2) Source: http://vietnamnews.vn/economy/263477/ hcm-city-signs-bt-infrastructure-deal.html

16 HCMC | Thu Thiem - The Pudong of Saigon LAND ALLOCATION

8 The Northern residential area Neighbourhood #8 consists of neighbourhoods encompasses the entire #3 and #4 Southern Delta area

The residential areas along the Mai Chi Tho Boulevard are shown as #5 and #6 respectively

(1) See Infrastructure Map page 20-21 (2) Source: http://vietnamnews.vn/economy/263477/ hcm-city-signs-bt-infrastructure-deal.html

Launch of the first 1/2000 master plan by Work on Thu residential project architecture firm Sasaki Planning for Relocation of existing Thu Thiem 1 Thu Thiem Tunnel Thiem 2 Bridge in Thu Thiem by Associates unveiled Thu Thiem begins residents officially begins Bridge opened opened begins Dai Quang Minh

1996 2002 2008 2011 2012 2/2015 7/2015

Source: http://www.thuthiem.hochiminhcity.gov.vn INFRASTRUCTURE East-West FOUR MAJOR ROADS Highway Total length: 11.9km Connects Thu Thiem Investor: Dai Quang Minh and to residential and Vietnam Infrastructure Development THU THIEM 4 BRIDGE commercial districts and Finance Investment JSC. (VIDIFI) Linking Thu Thiem with to the east Construction started in 2014, to be District 7 completed in 2017 Under-planning

THU THIEM 1 BRIDGE Linking Thu Thiem with Binh Thanh Dist. Authority Opened in 2008

THU THIEM 3 BRIDGE Linking Thu Thiem with District 4 Under-planning

1996 2002 2008 2011 2012 2/2015 7/2015

THU THIEM 1 BRIDGE Linking Thu Thiem with Binh Thanh Dist. Authority Opened in 2008

THU THIEM 3 BRIDGE Linking Thu Thiem with District 4 Under-planning

THU THIEM 2 BRIDGE Linking Thu Thiem with District 1 (at one end of PEDESTRIAN BRIDGE Ton Duc Thang Str.) Linking Thu Thiem with District 1 Investor: Dai Quang Minh (at Me Linh Square) Under-construction, set to open in 2018 Investor: Dai Quang Minh Under Design and Concept Contest THU THIEM TUNNEL Linking Thu Thiem with District 1 Investor: Thu Thiem Authority Opened in 2011 © CBRE Ltd. 2015 19 Plot 1 + 3 Plot 7 Section 1-3 and 3-5: Trung Thuy Group MAJOR APPROVED PROJECTS Marina Complex (Parcel 7-2) got approval to study development and Status: Sult Marina Development Pte Ltd. design plan for a 1,16 ha site (Singapore) and Sai Gon Yacht Corp Section 1-15 and 3-3, 3-7, 3-1: GS have registered for development but no E&C got approval to carry out investment activity yet plan for a 4 ha site Total area: 5.4 ha Gross floor area (GFA): 5.000 sq. m. Floor area ratio (FAR): 0.14 Height: 6 stories 3 4 7 Commercial ratio: 100% 1 Plot 2a: Thu Thiem EcoSmart City 6 Mixed-use Status: In-principal approval in 2014 2a Developer: Lotte, Mitsubishi, Toshiba 2b 5 Area: 10 ha | GFA: 730,000 sq. m. Total investment cost: US$2.2 billion 2c Plot 5 + 6 Mixed-use Status: In-principal approval, residential component construction started in 2013, 8 launched in Jul 2015 Developer: Dai Quang Minh Area: ~100 ha GFA: 730,000 sq.m. Total investment cost: US$2.2 billion Plot 8 Plot 2b: Empire City Project Eco-forest Park Mixed-use including 86-storey landmark building Status: In-principal approval Status: In-principal approved, construction to start Developer: Dai Quang Minh at the end of 2015 Parcel Area: 17.9 ha Developer: JV Tien Phuoc – Tran Thai – Gaw Gross floor area (GFA): 60,000 m2 Capital Partner Floor area ratio (FAR): 0.34 Area: 14.5 ha| GFA: 730,000 sq. m. Height: 4 stories Total investment cost: US$1.2 billion Commercial ratio: 100%

20 HCMC | Thu Thiem - The Pudong of Saigon Plot 1 + 3 Plot 7 Section 1-3 and 3-5: Trung Thuy Group MAJOR APPROVED PROJECTS Marina Complex (Parcel 7-2) got approval to study development and Status: Sult Marina Development Pte Ltd. design plan for a 1,16 ha site (Singapore) and Sai Gon Yacht Corp Section 1-15 and 3-3, 3-7, 3-1: GS have registered for development but no E&C got approval to carry out investment activity yet plan for a 4 ha site Total area: 5.4 ha Gross floor area (GFA): 5.000 sq. m. Floor area ratio (FAR): 0.14 Height: 6 stories 3 4 7 Commercial ratio: 100% 1 Plot 2a: Thu Thiem EcoSmart City 6 Mixed-use Status: In-principal approval in 2014 2a Developer: Lotte, Mitsubishi, Toshiba 2b 5 Area: 10 ha | GFA: 730,000 sq. m. Total investment cost: US$2.2 billion 2c Plot 5 + 6 Mixed-use Status: In-principal approval, residential component construction started in 2013, 8 launched in Jul 2015 Developer: Dai Quang Minh Area: ~100 ha GFA: 730,000 sq.m. Total investment cost: US$2.2 billion Plot 8 Plot 2b: Empire City Project Eco-forest Park Mixed-use including 86-storey landmark building Status: In-principal approval Status: In-principal approved, construction to start Developer: Dai Quang Minh at the end of 2015 Parcel Area: 17.9 ha Developer: JV Tien Phuoc – Tran Thai – Gaw Gross floor area (GFA): 60,000 m2 Capital Partner Floor area ratio (FAR): 0.34 Area: 14.5 ha| GFA: 730,000 sq. m. Height: 4 stories Total investment cost: US$1.2 billion Commercial ratio: 100%

© CBRE Ltd. 2015 21 Go Vap Xi RIVERVIEW PALACE Q4/08 launch price: US$2,150 (full furnishes) District Q3/15 price: US$2,350 - $2,650 PHUOC LONG Unit size: 138 - 195sqm Total units: 270 Scale GATEWAY THAO DIEN Q2/15 launched price: US$1,800 (full finishes) 2km Binh Thanh MASTERI THAO DIEN Q3/15 price: US$1,996-2,115 Unit size: 45 - 136 sq. m. Q4/14 launched price: US$1,520 Total units: 439 District (basic finishes) Q3/15 price: US$1,770 Unit size: 45 - 87 sq. m. RACH CHIEC METRO LINE 1 Total units: 3,025

Phu Nhuan METRO STATION VINHOMES CENTRAL PARK District Q4/14 launched price: US$2,122 (full finishes) AN PHU Q3/15 price: US$2,200 – $2,510 for Park 1, Park 6 MAJOR HIGH-END ~US$4,000 for Landmark 81 Unit size: 50 – 108 sq. m. ESTELLA HEIGHTS CONDOMINIUM Total units: 10,000 NEW PORT Launched price: US$1,900 (full finishes) THAO DIEN Q3/15 price : US$2,130 for 89 sq. m. Unit size: 80 - 135 sq. m. Total units: 824 VAN THANH HIGH-END CONDOMINIUM THE SUN AVENUE Launched price: US$1,480 (basic finishes) Q3/15 price: US$1,650 Unit size: 67 - 87 sq. m. PRICE COMPARISON Total units: 3,000

District 3 BA SON District 2

SARIMI (SALA THU THIEM) OPERA HOUSE Developed by Dai Quang Minh Q3/15 launched price: US$2,000 - $2,800 (full finishes) CBD Unit size: 82 - 123 sq. m. VISTA VERDE District Total units: 414 Launched price: US$1,680 (basic finishes) Q3/15 price: US$1,700 10 BEN THANH Unit size: 45 - 177 sq. m. Total units: 1,152 ICON 56 Q1/14 launched price : US$ 2,910 (bareshell) Q3/15 price: US$3,210 Unit size: 47-112 sq. m. gross area Total units: 328 Thu Thiem

District 1 THE TRESOR Q4/14 launched price: US$2,900 (bareshell) Q3/15 price: US$2,720 Unit size: 57-114 sq. m. Total units: 498 Handover Conditions Bathroom suites Kitchen cabinet Air-conditioner Wardrobe THE GOLDVIEW Basic finishes Y N N N Q3/15 launched price: US$1,650-2,050 RIVERGATE District 4 (basic finishes) Q4/14 launched price US$2,660 (bareshell) Full finishes Y Y Y Y/N Unit size: 45-123 sq. m. Q3/15 price : US$2,610 Total units: 1,846 Unit size: 56-114 sq. m. Prices are quoted exclusive of 10% VAT and 2% maintenance fee Total units: 276 Source: CBRE Research, Q2 2015.

22 HCMC | Thu Thiem - The Pudong of Saigon Go Vap Xi RIVERVIEW PALACE Q4/08 launch price: US$2,150 (full furnishes) District Q3/15 price: US$2,350 - $2,650 PHUOC LONG Unit size: 138 - 195sqm Total units: 270 Scale GATEWAY THAO DIEN Q2/15 launched price: US$1,800 (full finishes) 2km Binh Thanh MASTERI THAO DIEN Q3/15 price: US$1,996-2,115 Unit size: 45 - 136 sq. m. Q4/14 launched price: US$1,520 Total units: 439 District (basic finishes) Q3/15 price: US$1,770 Unit size: 45 - 87 sq. m. RACH CHIEC METRO LINE 1 Total units: 3,025

District 3 BA SON District 2

Management mechanism: The major focus of development in Thu The developer of Thu Thiem is a Thiem is on office and commercial real state-owned company (Thu Thiem estate. However, a sizable volume of Investment and Construction Authority) commercial supply already exists on the which does not have the absolute West of the Saigon River on more or less For HCMC to expand in all directions, authority to make quick decisions on the the same scale. Additional development project’s overall vision, budget and currently underway on the West side of the success of the Thu Thiem New Urban staffing. All decisions have to be the river (the existing CBD) will make Thu approved by the city government, which Thiem even more unattractive to Area project is vital. oen takes a considerable time. investors. The total GFA of newly-approved projects on the West side Policies and incentives to attract investors including Tan Cang, Ba Son and Khanh to Thu Thiem in the next 10-15 years Hoi is 4.9 million sq. m., marginally less remain very limited. than the 5.1 million sq. m. planned for Lack of synchronous infrastructure. The the core area of Thu Thiem (zone 1, 2, 3 four main streets of this area are still under and 4). Assuming net absorption construction and will only be completed in continues at levels recorded in Q2 2015 the next 1-2 years. (an increases 1.4% q-o-q) it will take 12 years to absorb the total supply provided Land prices are high. Investment costs in by these three sites on the West side. Thu Thiem new residential area are significant at an average of over US$3,000 per sq. m. In addition, the city does not offer credit for land leasing and requires investors to pay for it immediately.

OPPORTUNITIES CHALLENGES

Strategic location Slow progress of infrastructure development Cleared site provides a very large High land prices land bank Current lack of demand for space in HCMC, Masterplan in place especially from the ﬁnancial services sector Lack of big land bank Lack of strong command and control in the existing CBD Slow pace of activity to date HCMC set to become a global megacity Fractured ownership and speculative investment Limited tax powers and levers Local, regional and global competition

24 HCMC | Thu Thiem - The Pudong of Saigon WHAT IS HOLDING BACK THU THIEM?

OPPORTUNITIES CHALLENGES

BACKGROUND recently as the early 1990s, the 25 years later, Pudong has become a thriv- Shanghai Stock Exchange as well as many of Pudong area of Shanghai was ing commercial and financial centre of Shanghai’s most notable buildings includ- mainly farmland. Commercial Shanghai and stands as a symbol of Shang- ing the Oriental Pearl Tower, the Jin Mao As development in the area was hai’s modernisation and the reform and Tower, the Shanghai World Financial Center limited to a few warehouses and wharfs on the opening up of China. Pudong has attracted and China’s tallest structure, the 632 m tall riverfront. In 1990 the Central Committee of many of the world’s largest financial firms Shanghai Tower Properties in Pudong now the Communist Party of China (CCCPC) and to establish a presence and is also a popular achieve higher rental levels compared to the the State Council announced plans to re-devel- residential area for some of China’s most historic Puxi area on the opposite side of op Pudong, a move which ushered in the rapid wealthy people. The area is also home to the river. development of the area. Lujiazui Finance and Trade Zone and the

26 HCMC | Thu Thiem - The Pudong of Saigon CASE STUDY: PUDONG 2013

© CBRE Ltd. 2015 27 Incentives for Pudong In order to support the development of Pudong authorities introduced a number of incentives Pudong: 25-Year Summary Statistics -1990 vs.2014 to encourage development. These included: Gross Domestic Product RMB billion RMB billion 1990: Tax deductions, exemptions and “One-stop” approval procedures introduced 6 711 other incentives for infrastructure for foreign-invested projects. investment. Reform of local administration to a Fiscal revenue 1992: Pudong permitted to issue stocks and simpliﬁed two-level structure. The RMB 1billion RMB 290 billion bonds to attract investment. Government of Pudong has authority equivalent to that of a sub-provincial 2002: Gold and diamond exchanges moved Chinese city, half a level above the authority from downtown Puxi to Pudong. 229 308 143 given to Shanghai’s other districts. Companies named in Headquarters of 2005: Foreign banks allowed to do business Multinational Introduction of a Special Economic Zone the Fortune Global 500 local companies. in local currency. headquarters strategy. Pudong was granted status as a Projects in Pudong given status as Pilot Free Trade Zone allowing a series of “National Priority Projects”. projects which are subject to lower levels of Allocation of Pudong annual Government regulation. loans of US$90 million.

Development Timeline for the core of Pudong New Area - Lujiazui Financial District

2015 Shanghai Tower Height: 632 m 2002 2008 Bocom Financial Towers Shanghai World Financial Center Height: 230 m Height: 492 m

1994 1999 Oriental Pearl Tower Jinmao Tower Height: 468 m Height: 420 m

BEGINNING PHASE HINDER ACCELERATE BOOMING

1990 - 1997 1997 - 2001 2001 - 2008 2008 - Now

Area established Effected by 1997 financial crisis, 2002, Super Brand Mall opened Core area fully developed, Attract several financial institute in development delayed (a large-scale shopping center) 2007 start expansion to east areas. China, including CBC ICBC, Developing municipal facilities Office/residential/tourism all Improve supporting services for financial Shanghai Stock Exchange Market developing 229 multinational headquarters, Cooperate with CHIA TAI, Mori 308 companies named in the Fortune Global 500 Building Co. and 143 headquarters of local companies

600,000 sq. m. 1,750,000 sq. m. 3,000,000 sq. m. 3,500,000 sq. m. Mainly Office Mainly office, exhibition centre and Continued office construction, but Continued office construction, but retail developed increasing residential and retail increasing residential and retail Source: CBRE Research, Q1 2015.

28 HCMC | Thu Thiem - The Pudong of Saigon Incentives for Pudong In order to support the development of Pudong authorities introduced a number of incentives Pudong: 25-Year Summary Statistics -1990 vs.2014 to encourage development. These included: Gross Domestic Product RMB billion RMB billion 1990: Tax deductions, exemptions and “One-stop” approval procedures introduced 6 711 other incentives for infrastructure for foreign-invested projects. investment. Reform of local administration to a Fiscal revenue 1992: Pudong permitted to issue stocks and simpliﬁed two-level structure. The RMB 1billion RMB 290 billion bonds to attract investment. Government of Pudong has authority equivalent to that of a sub-provincial 2002: Gold and diamond exchanges moved Chinese city, half a level above the authority from downtown Puxi to Pudong. 229 308 143 given to Shanghai’s other districts. Companies named in Headquarters of 2005: Foreign banks allowed to do business Multinational Introduction of a Special Economic Zone the Fortune Global 500 local companies. in local currency. headquarters strategy. Pudong was granted status as a Projects in Pudong given status as Pilot Free Trade Zone allowing a series of “National Priority Projects”. projects which are subject to lower levels of Allocation of Pudong annual Government regulation. loans of US$90 million.

Development Timeline for the core of Pudong New Area - Lujiazui Financial District

2015 Shanghai Tower Height: 632 m 2002 2008 Bocom Financial Towers Shanghai World Financial Center Height: 230 m Height: 492 m

1994 1999 Oriental Pearl Tower Jinmao Tower Height: 468 m Height: 420 m

BEGINNING PHASE HINDER ACCELERATE BOOMING

1990 - 1997 1997 - 2001 2001 - 2008 2008 - Now

Office Pudong rents grew faster than Puxi

12.0

10.4 10.0

Residential 8.4 da y

/ 8.0

Residential properties in Lujiazui . .m

riverside achieve higher level in the q s

/ price spectrum compared to the 6.0 R MB

historic Puxi area on the opposite t : n

side of the river. R e Tomson Riviera 4.0 RMB180,000 sq. m. 2.0 Shanghai Arch 0 RMB150,000 sq. m. 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 1 9 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 1 1 1 1 1 The Bound Of Bund Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q RMB 120,000 sq. m. Puxi Pudong

Buoyant demand from the ﬁnancial sector and tight supply to make Pudong an overwhelmingly landlord market; The rental gap between Pudong and Puxi stood at a 10-year high of 23% as of Q1 2015. Source: CBRE Research, Q1 2015.

30 HCMC | Thu Thiem - The Pudong of Saigon Suhe Creek OCT RMB 150,000 sq. m. ONE CITY, TWO SCENARIOS

Office Pudong rents grew faster than Puxi

12.0

10.4 10.0

Residential 8.4 da y

/ 8.0

Residential properties in Lujiazui . .m riverside achieve higher level in the q s

/ price spectrum compared to the 6.0 R MB

historic Puxi area on the opposite t : n side of the river. R e Tomson Riviera 4.0 RMB180,000 sq. m. 2.0 Shanghai Arch 0 RMB150,000 sq. m. 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 1 9 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 1 1 1 1 1 The Bound Of Bund Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q RMB 120,000 sq. m. Puxi Pudong

udong shares a number of similarities Central Government actively promoted therefore the area has not with Thu Thiem in terms of its Pudong on the world stage to raise global achieved the status of an engine for geographical location, a connecting river finance for the development of its economic and financial P tunnel and the same ambitious vision of infrastructure at a very early stage and also development. creating a new central business district provided support during the Asian overlooking the existing one across the river. Key Financial Crisis. Pudong possessed an effective factors behind the success of Pudong, which masterplan. Landmark buildings in Thu Thiem would do well to learn from, include The Central Government also introduced a Pudong are clustered around the exit of the the following: Special Economic Zone strategy, with tunnel linking the area with the historic city Pudong the only area to be granted the centre and reflect the real market value of The Central Government empowered local status of a Pilot Free Trade Zone. This this strategic location. In Thu Thiem, this authorities in Shanghai and Pudong with many privileged SEZ status led to the introduction area is reserved for sites of lower plot ratio, privileges and selective intervention. The of comprehensive reforms including tax which is not capitalising on its true government of Pudong possesses authority deductions, exemptions and other potential. Pudong has also converted port equivalent to that of a sub-provincial Chinese incentives for infrastructure investment; warehouses and wharfs on its riverfront into city, half a level above the authority given to Pudong permitted to issue of stocks and public areas such as green parks, shopping Shanghai’s other districts. bonds; gold and diamond exchanges moved areas and promenades, creating a social hub from downtown Puxi to Pudong; and for the area. In Thu Thiem, the recent The development plan of Pudong was “one-stop” approval procedures introduced conversion of port and shipyard facilities considered a national-level goal (Projects in for foreign-invested projects. These into a large township development on the Pudong were bestowed the status of “National innovations have not yet been adopted in West bank (or the existing central business Priority Projects”). However, this emphasis is Thu Thiem. Other key economic zones district of HCMC) has negatively affected the lacking at Thu Thiem, which is considered to be around Vietnam have been bestowed with attractiveness of Thu Thiem and a development project in HCMC, an not a major similar incentives as Thu Thiem and discouraged relocation over the river. project of national importance. The Chinese

32 HCMC | Thu Thiem - The Pudong of Saigon The success of Pudong has been driven by a LESSONS LEARNT number of key factors, which Thu Thiem would FROM PUDONG do well to learn from. udong shares a number of similarities Central Government actively promoted therefore the area has not with Thu Thiem in terms of its Pudong on the world stage to raise global achieved the status of an engine for geographical location, a connecting river finance for the development of its economic and financial P tunnel and the same ambitious vision of infrastructure at a very early stage and also development. creating a new central business district provided support during the Asian overlooking the existing one across the river. Key Financial Crisis. Pudong possessed an effective factors behind the success of Pudong, which masterplan. Landmark buildings in Thu Thiem would do well to learn from, include The Central Government also introduced a Pudong are clustered around the exit of the the following: Special Economic Zone strategy, with tunnel linking the area with the historic city Pudong the only area to be granted the centre and reflect the real market value of The Central Government empowered local status of a Pilot Free Trade Zone. This this strategic location. In Thu Thiem, this authorities in Shanghai and Pudong with many privileged SEZ status led to the introduction area is reserved for sites of lower plot ratio, privileges and selective intervention. The of comprehensive reforms including tax which is not capitalising on its true government of Pudong possesses authority deductions, exemptions and other potential. Pudong has also converted port equivalent to that of a sub-provincial Chinese incentives for infrastructure investment; warehouses and wharfs on its riverfront into city, half a level above the authority given to Pudong permitted to issue of stocks and public areas such as green parks, shopping Shanghai’s other districts. bonds; gold and diamond exchanges moved areas and promenades, creating a social hub from downtown Puxi to Pudong; and for the area. In Thu Thiem, the recent The development plan of Pudong was “one-stop” approval procedures introduced conversion of port and shipyard facilities considered a national-level goal (Projects in for foreign-invested projects. These into a large township development on the Pudong were bestowed the status of “National innovations have not yet been adopted in West bank (or the existing central business Priority Projects”). However, this emphasis is Thu Thiem. Other key economic zones district of HCMC) has negatively affected the lacking at Thu Thiem, which is considered to be around Vietnam have been bestowed with attractiveness of Thu Thiem and a development project in HCMC, an not a major similar incentives as Thu Thiem and discouraged relocation over the river. project of national importance. The Chinese

hu Thiem has the potential to generate far-reaching improvements to life in Ho Chi Minh City and bolster the city’s image and standing on the worldT stage. However, CBRE believes that radical new policies are required if the government’s vision of creating a “Pudong of Saigon” is to become a reality. The project must be accorded the status of a national priority and requires stronger support from the central government. Authorities should introduce special privileges and incentives to attract more investors to the area. In addition, the local government of Thu Thiem should be given special status by the central government to allow it to operate more effectively and enact policies which will assist and encourage the development of the area. If this is done, local and central governments will be able work together to encourage potential investors by introducing incentives such as tax deductions or exemptions. It is vital that the investment procedure for potential foreign investors is made clearer and simpler. The introduction of a “one stop” approval procedure for foreign invested projects will remove much of the uncertainty that could be inhibiting investment; minimise speculation and prevent land prices from becoming prohibitively high. Other suggested measures include limiting approvals for projects on the West bank of the Saigon River as these may deflect potential investment away from Thu Thiem. The implementation of the measures outlined above will ensure Thu Thiem will stand out as the single most attractive focus for potential investment in Ho Chi Minh City and will support its development as the city’s new economic and financial centre.

REFERENCES Oﬃcial Website of Thu Thiem New Urban Area (http://www.thuthiem.hochiminhcity.gov.vn/)

Oﬃcial Website of Pudong New Area Government (http://english.pudong.gov.cn/)

Howard Dawber, 2014. Canary Wharf: Lessons for Thu Thiem

Ngo Viet Nam Son, 2012. Thu Thiem New Face First Phase, Published on The Saigon Times on Jan 22, 2012.

Sasaki Associates, 2012. Thu Thiem 1/2000 Master Plan Adjustment

Yawei Chen, 2007. Shanghai Pudong: Urban Development in an Era of Global-local Interaction.

34 HCMC | Thu Thiem - The Pudong of Saigon CONCLUSION hu Thiem has the potential to generate far-reaching improvements to life in Ho Chi Minh City and bolster the city’s image and standing on the worldT stage. However, CBRE believes that radical new policies are required if the government’s vision of creating a “Pudong of Saigon” is to become a reality. The project must be accorded the status of a national priority and requires stronger support from the central government. Authorities should introduce special privileges and incentives to attract more investors to the area. In addition, the local government of Thu Thiem should be given special status by the central government to allow it to operate more effectively and enact policies which will assist and encourage the development of the area. If this is done, local and central governments will be able work together to encourage potential investors by introducing incentives such as tax deductions or exemptions. It is vital that the investment procedure for potential foreign investors is made clearer and simpler. The introduction of a “one stop” approval procedure for foreign invested projects will remove much of the uncertainty that could be inhibiting investment; minimise speculation and prevent land prices from becoming prohibitively high. Other suggested measures include limiting approvals for projects on the West bank of the Saigon River as these may deflect potential investment away from Thu Thiem. The implementation of the measures outlined above will ensure Thu Thiem will stand out as the single most attractive focus for potential investment in Ho Chi Minh City and will support its development as the city’s new economic and financial centre.

REFERENCES Oﬃcial Website of Thu Thiem New Urban Area (http://www.thuthiem.hochiminhcity.gov.vn/)

Oﬃcial Website of Pudong New Area Government (http://english.pudong.gov.cn/)

Howard Dawber, 2014. Canary Wharf: Lessons for Thu Thiem

Ngo Viet Nam Son, 2012. Thu Thiem New Face First Phase, Published on The Saigon Times on Jan 22, 2012.

Sasaki Associates, 2012. Thu Thiem 1/2000 Master Plan Adjustment

Yawei Chen, 2007. Shanghai Pudong: Urban Development in an Era of Global-local Interaction.

35 For more information about this regional major report, please contact Research

Desmond Sim Dung Duong, MRICS Ngoc Le Head of Research, Southeast Asia Head of Vietnam Research Senior Manager +65 63261638 +848 3824 6125 +848 3824 6125 [email protected] [email protected] [email protected]

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Nick Axford, Ph.D. Richard Barkham, Ph.D., MRICS Global Head of Research Global Chief Economist +44 20 7182 2876 +44 0 20 7182 2665 [email protected] [email protected]

Henry Chin, Ph.D. Neil Blake, Ph.D. Spencer Levy Head of Research, Asia Pacific Head of Research, EMEA Head of Research, Americas +852 2820 8160 +44 20 7182 2133 +1 410 951 8443 [email protected] [email protected] [email protected] Follow Neil on Twitter: @neilblake123

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