Vietnam | November 2017

JLL Research Report Time for Thu Thiem The largest mixed-use inner city development in Southeast Asia Key takeaways from this report

1. Time to buy residential units A. Acquire land from an existing owner that has Figure 1: Old CBD v.s. new CBD prime apartment selling price been allocated land. Residential prices in Thu Thiem are currently trading at US$/sqm 30-35 percent discount below District 1 levels. In Shanghai, B. Form a joint venture (JV) with a local partner who 30,000 apartment prices in Pudong are 43 percent above Puxi, the has been allocated land. old CBD and Bonifacio prices are the same as Makati. Over C. Enter bidding process for the land that has yet to 25,000 time, we expect Thu Thiem to follow a similar trend. be allocated. 43%

2. “Tipping point” for office development 5. Phasing 20,000 With lack of supply and increasing rents in the existing CBD, It is important to note that Thu Thiem is 657 hectares, with and the completion of a major infrastructure within Thu 20,426 residential units and 3.4 million square metres of 15,000 Thiem, we anticipate large head office requirements will commercial space. It is critically important that developers start to consider Thu Thiem as a viable alternative to the pay careful attention to market conditions and supply and 10,000 existing CBD. demand dynamics to limit the risk of oversupply in the future.

3. Lack of government funding and incentives 6. Long term construction site 5,000 0% -34% Unlike other new urban development area in other countries, It is inevitable on a large mixed-use development site that the lack of preferential policies/incentives are the biggest the area will be a construction site for a number of years. 0 impediments to the development of Thu Thiem. Developers/ Developers and purchasers of residential property will need Puxi Pudong Makati Bonifacio District 1 Thu Thiem investors will need strong support from the government on to be mindful of this fact when investing in Thu Thiem. Shanghai Philippines Vietnam legal and tax-related matters. Creating a more favourable and Source: JLL Research more transparent business environment will act as a catalyst, 7. Time for school operators to enter the market speeding up Thu Thiem’s development progress. According to the master plan, 10 land parcels are set aside for school developments to serve the educational needs 4. Difficulty in acquiring land of Thu Thiem residents and surrounding areas. Due to lack While the majority of land has been allocated, many sites of infrastructure and residential community this sector has have not been developed. In our opinion, there are three attracted less attention thus far. However, there are a number potential ways to acquire land in Thu Thiem. of opportunities for school operators wanting to expand their footprint in this attractive market.

2 | JLL Time for Thu Thiem 3 Time to invest in Thu Thiem

Thu Thiem, Ho Chi Minh’s proposed according to Vietnam Automobile will become a vibrant destination financial district and mixed-use urban Manufacturers’ Association (VAMA) combining residences, offices, area, is set to become the largest inner figures. shopping centres, hotels and serviced city development in Southeast Asia apartments. in the coming years. Once complete, The master plan for Thu Thiem will Ho Chi Minh City will transform into a alleviate the pressures faced in the It is fair to say Thu Thiem has suffered District existing CBD, with the possibility of a chequered history, with many false modern megacity, following a similar 12 1A path to Shanghai, Manila, Bangkok and saving some of the historic urban centre starts because of complicated land Jakarta. of the “Pearl of Asia” from demolition compensation issues, turbulent y and redevelopment. economic conditions and lack of wa 1A Thu Duc igh Over the past 30 years, Ho Chi Minh City favourable government policies. i H The 657-hectare site is located on the o has witnessed a meteoric rise. However, However, with pressure mounting N a rapid growth comes with growing pains. Saigon River’s opposite side, facing on the existing CBD and renewed H Go Vap Infrastructure within the existing CBD is the existing CBD. Comprising 176 impetus on the completion of major starting to buckle under the pressure of land parcels with approximately 3.2 infrastructure, we believe that now Tan Son million square metres (GFA) residential Nhat Airport District rapid expansion, vacant land is difficult more than any other time since its 9 to find, land values have reached levels space and 3.4 million square metres inception 12 years ago, Thu Thiem has (GFA) of commercial space, the total Binh that make office development unviable, reached a “tipping point”. It’s time Thanh and office rents have reached levels site will eventually accommodate a for investors to set their sights on Thu Tan Binh District 3 not seen since 2008. Traffic congestion residential population of 145,000 and Thiem for the investment opportunities Nguyen Duy Trinh has increased over the past five years, employee population of 217,000. The it offers. new financial district will be home to East-West with the number of cars increasing 35 Boulevard District a number of major head offices and 1A 2 percent per annum from 2012-2016, District THU 10 CBD District THIEM 11 District 5 District 657 Landha area District District 7 6 4

District 8 nh Li n Va n ye 9,784,129 sqm gu N

Total GFA*

Nguyen Huu Tho

362,563 people Total estimated population**

1A *Including basement area **As per master plan, total population included 145,393 residents and 217,170 employees

4 | JLL Time for Thu Thiem 5 Strategically located to benefit from the future growth of the City

Sitting at the heart of Ho Chi Minh From Thu Thiem, people can reach the City, the Thu Thiem peninsula is the National Highway 1A and 51, and also most significant development area in the Long Thanh-Dau Giay Expressway the city. Thu Thiem is bordered by the via the East-West Boulevard. The Suoi Tien Saigon River and is only five-minute future international airport will also be District 12 Hiep Binh Phuoc M1 drive away from the central business accessible from Thu Thiem. M3 district via the Thu Thiem Tunnel. Alternatively, one can easily reach the Thu Thiem will benefit from the future Vuon Lai CBD and other parts of Ho Chi Minh City Metro Line No. 2, which stretches from via the Thu Thiem Bridge 1, which links Thu Thiem (District 2) and ends in An the peninsula to Binh Thanh District. Suong (District 12) with the total length of approximately 19 kilometers. It is Located only 10 kilometers away from Go Vap the Tan Son Nhat International Airport, forecasted that once complete, the Thu Thiem is within convenient reach. metro line will handle approximately District 9 480,000 passengers per day. Tan Son Nhat Thu Thiem is a strategic gateway from International Ho Chi Minh City to future development The construction of the Metro Line Airport No. 2 and the four bridges is seen as areas to the east, including the new Binh proposed Long Thanh International the government’s determination and Thanh Airport. With the Thu Thiem Bridge 1 commitment to turn Thu Thiem into Ho Chi Minh City’s new financial and Proposed and Thu Thiem Tunnel in operation, Thu Thiem Proposed and once the other four bridges that residential district. By improving the Long Thanh Tan Phu train station are either in construction or planning infrastructure and accessibility to the International Airport stages are completed, residents in area, the authority hopes to encourage CBD and neighbouring district will more developers to invest in large-scale have direct connection to Thu Thiem. real estate projects here.

Thu District 11 Thiem District 4 M2 Thu Thiem is designated as Ho Chi Minh District 5 City’s new central business district. Ten Lua Cat Lai Port “ After the completion and operation of the infrastructure - including Metro Line District 8 No. 2 and Bridge No. 2,3,4 connecting to District 7 the District 1 and 7 – Thu Thiem will be operated properly as planned.

Mr. Yong-Beom(Kevin) Kim Functional Manager, Vietnam business team,” GS Engineering & Construction Corp

6 | JLL Time for Thu Thiem 7 Thu Thiem key development parameters

The Thu Thiem new urban area is divided into eight Land-use master plan Site Area (ha) % Components of development sites Site area (ha) % No. Key feature Key landmark/public building main functional areas, so-called “neighbourhood”. Each 1 • High density mixed- Convention & exhibition centre, Development Site 215.8 32.9% Residential 88.5 41.0% use central business Central square, Opera house, as landscaping and landmark buildings. district Planning information centre, Public parks 113.9 17.3% Commercial 72.8 33.7% The river park

Wetland 103.9 15.8% Other facilities 54.5 25.3% 2 • High density mixed-use Observation tower complex, development Sport complex, Local Road surface 159.5 24.3% Total land area 215.8 100% administration centre #7 Water surface 63.8 9.7% Source: Sasaki Master Plan 2012 & Thu Thiem I.C.A #4 3 • Mixed-use residential Thu Thiem museum Total land area 657 100% #3 4 • Mixed-use residential Central community hub, Source: Sasaki Master Plan 2012 & Thu Thiem I.C.A #1 • High-density Local administration centre, commercial buildings Fire station #6 • Low-density residential Development Summary Size Unit #2a and public buildings 5 • Public facilities Children’s palace, The “city Total parcel 176 Parcels #5 • Low-density residential hall”, Central community hub, #2b Total GFA (above ground) 7,563,750 Sqm Local administration centre #2c 6 • International hospital, Central Total GFA (under ground) 2,220,379 Sqm #8 • Low density mixed-use community hub Total NFA - Commercial (*) 2,540,588 Sqm residential • Mixed-use commercial Total NFA - Residential (*) 2,665,977 Sqm 7 • Marina Complex Urban resort hotel, Net floor area ratio (FAR) 3.5 • Mid to high-rise Marina Complez Source: Sasaki Master Plan 2012 & Thu Thiem I.C.A residential complex Residential units 20,426 Units 8 • Zone of enhanced Southern delta resort, Aquatic Residential population 145,393 People mangrove landscape park, Southern delta research • Dredged and cleaned Employee population 217,470 People waterways

Service apartment units 573 Units

Service apartment population 1,719 People

(*) Excluded neighbourhood No. 7 With its clear master plan, disciplined authority, cleared land plots, modern infrastructure and “proximity to the traditional business district 1, Thu Thiem will surely become Ho Chi Minh City’s modern district, one which is urgently needed.

Cosimo Jencks Chief Representative, Hong Kong Land ”

8 | JLL Time for Thu Thiem 9 Thu Thiem masterplan

Thu Thiem – A new modern mixed-used development Thu Thiem is designed to become a new mixed-use development area that combines both residential and commercial hubs. Of the total development site, 41 percent is designated for residential development. In terms of total NFA (excluding residential mixed-use area for resettlement purpose in neighbourhood no.7), both residential and commercial areas enjoy a share of approximately 49 percent and 51 percent, respectively. Land tender process Residential mixed-use Residential high density Residential low density Due to its close proximity to the existing CBD, the core area Commercial % % Commercial mixed-use – which consists of Parcel 1, 2a, 2b and 2c—is reserved to School of total land area of total land area Function park 13 11 become a new financial hub of the city. By integrating the Others is residential is commercial concept of “live-work-play” to Thu Thiem, the city authority Land use by sector seeks to alleviate the heavy traffic, reduce the level of pollution from transportation in the inner city, and create a vibrant living and working environment.

Sasaki’s plan for Thu Thiem incorporates different elements of natural landscape, linkages to the existing parts of Ho Chi minh City, and flexible urban development platform. Key elements for the peninsula are green areas and open space, both of which will consequently increase the value of the Thu Thiem as compared to the existing CBD.

GFA (sqm) However, the poor soil condition in Thu Thiem remains > 100,000

the main concern for many developers as it requires heavy 75,000 investment in pilling and foundation structures. < 50,000 GFA heat map % % Careful massing of buildings together with meticulous of total land area of total land area consideration for human scale will allow for a spectacular 24 43 view of the skyline. These will provide a delightful is road surface is natural land and pedestrian experience and enhance the living experience of residents in Thu Thiem. water surface

M

M

M M AE Note: The remaining 9% is reserved for public facilities

Bus line and Stop Circulator Bus line and stop M2 Metro line and stop Water Taxi and stop Ferry line and stop AE Airport Express station M Municipal subway and stations Transport network

Source: Sasaki Master Plan 2012 & Thu Thiem I.C.A

10 | JLL Time for Thu Thiem 11 Current land allocation - land tender process Current land allocation - construction status

Around 71 percent of land parcels (67 percent of Approximately, 62 percent of total GFA (above ground) total land area and 81 percent of total above GFA) have yet to start construction as some developers face in Thu Thiem have been officially approved challenges due to the lengthy process of obtaining all necessary legal/planning documentation approval. The most common way to obtain land in Thu Thiem is through the build-transfer (BT) agreement where land plots We also noted that most of the projects launched so far are are granted to developers in exchange for investing in residential. The market has yet to record any commercial infrastructure in the new urban area. 45 percent of the total projects other than the Thaco Complex of Dai Quang Minh, development site area have been officially approved through which is expected to complete by early 2018. a BT agreement in which Dai Quang Minh, the developer of Sala project, has been granted the largest land bank in return for constructing four main internal roads (Crescent Land tender process Completed Boulevard, Central Lakeside road, Saigon Riverside road, the Under construction (*) BT Under Planning Bidding Other road through ecological forest located in the Southern Delta), Bidding (in the future) City-funded Thu Thiem Bridge 2, and a pedestrian bridge. In addition, Others other parts of Thu Thiem are dedicated to Dai Quang Minh to build a 20-ha Central Plaza and a 9-ha River Park whose 1:500 (*) The JLL definition for a project being referred to as “under Source: JLL Research construction” will take effect once the process of test piling has master plans are in progress. commenced. Source: JLL Research Similarly, CII was granted approximately 90,000 square metres of freehold land and 6,000 square metres of 50-year leasehold land for residential and commercial purpose in exchanged for the construction of technical infrastructure for the northern residential area which consists of neighbourhood 3 and 4 and the main North-South arterial road. total development54% area allocated Phat Dat Real Estate Development JSC has also been via build-transfer agreement approved by the People’s Committee to conduct a study on the construction of Thu Thiem Bridge 4, which will link the peninsula to District 7. of total GFA have been completed11% Alternatively, land can be obtained through bidding process. In 2011, the city authority started the first tender for land parcels in Thu Thiem. Prior to 2016, 10 percent of total total development area10% approved development site area was granted through bidding process by bidding process to different consortiums of large investors.

According to the announcement from Thu Thiem of total GFA are under construction12% (*) Management Authority in Q2 2017, the remaining 16 percent of total development site will be tendered with the focus on five parcels in neighbourhood 2a. total development16% area planned for last bidding process

of total GFA are62% under planning

12 | JLL Time for Thu Thiem 13 Notable transactions and land value

Project Developers Parcel Deal size Transaction Sale launches Current status (% equity interest) (US$) time

Empire City Keppel Land (40%), 2.14, 2.15, 93.9 million 1H16 Linden Residences: • Master plan 1:500 Gaw Capital Partners (30%), 2.16, 2.17, December 2016 approved Tien Phuoc JSC (15%), 2.18, 2.19, Tilia Residences: • Undergoing piling test Tran Thai Real Estate 2.20, 2.21 July 2017 Co. Ltd. (15%)

Eco smart Lotte Asset Development, 2.1, 2.2, 2.3, Undisclosed 1H17 Not yet • Singed the contract city Lotte Shopping, Lotte 2.4, 2.5, 2.6 with People’s Hotel and Lotte E&C Committee of HCMC in July 2017 • Planning stage

Undisclosed CII (36%) and Hongkong Undisclosed Undisclosed Ongoing Not yet • Memorandum of Land (64%) Agreement signed in July 2017 • Master planning

Source: JLL Research

Land value period, (3) the most recent residential Dien have also witnessed increasing projects launched in Thu Thiem land prices. With rapid urbanisation, With the majority of the total land bank have witnessed strong demand, and the establishment of Thu Thiem in Thu Thiem confirmed, the remaining (4) finally Thu Thiem is the largest projects and some improvement in available land bank is scarce while the undeveloped clean and clear, master the legal and planning framework, it is Empire City demand for investment remains strong. planned land within the city centre. reasonable to say that land prices will Eco Smart City Land values within Thu Thiem have continue to increase over the coming On average, Thu Thiem’s land price Cll + Hongkong Land increased by 30 to 40 percent within years. The largest beneficiaries from is approximately one-third of District Others past three years. While this is a this price movement will be the early 1 and relatively low compared to considerable uplift, we believe it can pioneer investors in Thu Thiem as neighbouring districts such as District be substantiated for the following the higher risks that they had to bear 3 and 4. In addition to land values reasons: (1) initial land values are in the early stage of development Source: JLL Research appreciating in Thu Thiem, the coming off a relatively low base, (2) the are compensated. neighbouring areas in District 2, such speed of infrastructure construction as Dong Van Cong, An Phu and Thao has increased dramatically during this

14 | JLL Time for Thu Thiem 15 Residential market performance

High-end apartments target market for Could new supply threaten an increase in prices? High-end apartment primary selling price in Ho Chi Minh City heat map Thu Thiem • Despite the recent increase in transaction volumes and • Launched in 2015, Dai Quang Minh’s Sala project has sold price, we believe that the current cycle has yet to reach its 95 to 100 percent and recorded a 30 to 35 percent increase peak. It is forecasted that the supply of apartments in Thu in sales prices compared to when the units were first Thiem area will rise in the coming years as a new wave launched. of luxury branded apartments from major investors is expected to hit the market. This new wave of supply might • The Empire City project commenced a soft launch in establish a new price level in Thu Thiem as the urban area December 2016 and a subsequent launch in July 2017, becomes more developed with value-added services, such Binh Thanh with the projects named as Linden Residence and Tilia as schools, hospital, entertainment centres, etc. District Residence, respectively. Both residential projects, totalling up to approximately 1,000 units, are almost sold out within • The apartment selling price is predicted to keep on rising, the first few weeks of the launch. The average selling price and we expect that this uptick will be an offset, helping the District 2 of Tilia increased by approximately 20 to 25 percent in investors achieve the expected return in the context of land District 3 comparison to Linden during six months. This increment prices increase. is not only because of Tilia’s closer proximity to the Saigon • Given a growing economy with strong demand from the River and better quality in terms of design and construction, District 1 buyers who either have cash-on-hand or the ability to District 10 Thu Thiem but also a reflection of high demand for the project. - CBD leverage, it is likely to see that the buyers are taking a long- • With a booming high-end residential market and the term view in their purchase decision, which is a positive sign for Thu Thiem. abundant opportunities for commercial development, District 4 District 2 has become the focal point for large-scale • There are still plenty of investors hunting for good District 5 developments in the past three years. Because of the > 3,000 investment opportunities in Thu Thiem at a reasonable quality of the master plan and the proximity to District 1, land price through acquisition or joint venture with good Thu Thiem is possibly the most attractive part of District 2. local partner. Hence, we expect this trend will support a District 7 > 2,750 strong sustainable growth in this focal development of the city. > 2,500

Figure 2: High-end apartment primary selling price Figure 3: High-end apartment units launched

US$/sqm Units Average latest 10,000 No. Developers Projects Building No. of units (*) Sales rates Launch time 5,000 asking price

4,000 8,000 1 Sarimi 368 sold out 2,850 - 2,950 3Q15 2 Sadora 605 > 95% 2,200 - 2,300 2Q16 Dai Quang Minh Sala phase 1 3,000 6,000 3 Sarica 130 sold out 2,850 - 2,950 3Q16

2,000 4,000 4 Sarina 186 > 95% 2,850 - 2,950 4Q16 sold out 4Q16 5 Keppel Land, Gaw Linden Residences 510 2,900 - 3,000 1,000 2,000 Empire City Capital, Tran Thai, 6 Tien Phuoc Tilia Residences 472 > 95% 3,400 - 3,500 3Q17 0 0 Source: JLL Research 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (*) Latest asking price are based on 3Q17 primary price for launching projects. For sold-out projects , asking price was recorded from secondary Ho Chi Minh City District 1 Thu Thiem Ho Chi Minh City District 1 Thu Thiem market at 3Q17.

Source: JLL Research Source: JLL Research

16 | JLL Time for Thu Thiem 17 Why is the strong interest not equating to faster development? Besides the "hard infrastructure" developed during the last few years “ and a well master planning guided by the government in Thu Thiem, investors and the local community are beginning to recognise the In the early stages when the city The other main reasons for the slow In term of policy/incentive, the lack strong growth potential of the area. However, to make it a desirable government started master planning development progress in Thu Thiem of attractive business environment place to live, work, play and learn, Thu Thiem new township will Thu Thiem, many investors expressed related to infrastructure and policy/ is another factor that dampens the a keen interest to participate in many incentives. After the Thu Thiem attractiveness of Thu Thiem. Many need soft infrastructure such as convention and exhibition centre, projects in the peninsula. These Tunnel completed construction in investors revealed that it was difficult schools, healthcare facilities, outdoor sport facilities, entertainment… investors included Lotte, GS, Sama 2011, the city authority realised the for them to estimate the investment to become a truly new international financial, service and urban Dubai, Bouygues, TECO, Urban importance of the private sector to timeline and return due to the slow centre of Ho Chi Minh City. Development Investment Corporation, support infrastructure for this landmark and lack of transparency involved The Consulates of Singapore, Thailand development project. The city authority in the investment procedure. In Nhan Vo and New Zealand. However, during the decided to enter several BT agreement addition, developers, especially those General Director, Empire City JV ” very early stages, the overall planning contracts to build the rest of the main with a strong investment appetite of the project was still incomplete, the infrastructure of Thu Thiem. Since for commercial properties, are still legal framework was not established, then, the development of infrastructure waiting for more preferable policies or and, most important, the land price has gathered pace. In the first half of incentives to be implemented for was relatively high when compared 2017, JLL recorded the progress of this area. to construction density and plot infrastructure development in Thu ratios which were relatively low and Thiem as below: infrastructure was non existent.

Over the following 10 years, the rate of development in Thu Thiem remained stagnant mainly because of land compensation issues. Only recently, in June 2017, 99 percent of the total 35% 37% 44% land bank in Thu Thiem became fully compensated, according to the District 2's Resettlement Committee. 87 units have yet to be compensated which Main infrastructure1 External connection2 Internal connection3 includes 83 households and 4 religious establishments. Source: JLL Research, Sasaki Master Plan 2012.

1 As per master plan, main infrastructure consists of Thu Thiem water plant, sewage treatment plant, rainwater drainage and levelling, electricity and telecommunications. 2 As per master plan, external connection consists of East-West Boulevard & Thu Thiem tunnel, Thu Thiem 1, 2, 3, 4 bridge, pedestrian bridge; URMT, bus routine and ferry boat. 3 As per master plan, internal connection consists of four main internal roads (Crescent Boulevard, Central Lakeside road, Saigon Riverside road, the road through ecological forest located in the Southern Delta), North-South road, square road, four urban canals, water taxis, and other internal roads.

18 | JLL Time for Thu Thiem 19 Regional Case Studies

Lujiazui Finance and Trade Shanghai has served as a gateway Little Lujiazui) is identified as the core Zone, Pudong, Shanghai, China of China toward the outside world, area of Pudong’s development and also geographically and economically. the site for the extension of the historic Under heavy pressure to undertake downtown district of Shanghai across drastic urban transformation because the Huangpu River. of the growing housing supply shortage, the deterioration in living conditions, With all the favourable policies and as well as fierce global competition, the incentives provided and relatively expansion of the traditional Puxi CBD in cheap land price, Pudong became Shanghai was needed in the 1990s. the perfect choice for both new developments and relocation projects. Before 1990, Pudong was home The area’s real estate market has grown to harbour industry, low-quality dramatically, taking an increasing share housing, insufficient infrastructure of Shanghai’s office space, housing and and vast farmland stretches. The industrial buildings, and played a more transformation of Pudong, from a and more crucial part in Shanghai’s real poor and undeveloped area into estate market. an energetic country town, serves as one of the best examples of the Although the Pudong development large-scale urbanisation process in initially aimed to encourage economic China, particularly and in the region growth and serve as a pilot project for generally. As a part of Pudong master the reform of the Shanghai market, it is plan, Lujiazui Financial and Trade Zone undeniable that property development (also known as Greater Lujiazui) and its and the growth of the real estate market 170-ha waterfront area (also known as would play a key role.

Lujiazui Finance And Trade Zone Established year Factors of success Key Development Figures • Considered as 1990 national priority project • Preferential policies and tax applied Total land (ha) • Basic infrastructure in place and 2,800 continuously developed • Having special free Core area Lujiazui‘s trade zones Central business district (ha) 170

20 | JLL Time for Thu Thiem 21 Pudong's development timeline

1990 1995 2000 Starting at higher level, properties in Pudong have been Initial phase Main development phase Continuous development able to achieve premium value and more favourable growth “ rate compared to its peers in traditional city centre. Management: Management: Management: • Pudong Development Office of • Shanghai Pudong International • Develop Pudong and Shanghai as the the Shanghai Municipal People's Airport Preparatory Office opened international financial centre and the Government opened (1990) (1995) international shipping centre (2009) ” • Shanghai Pudong Development • Shanghai Pudong Customs and Planning & Research Institute opened Waigaoqiao Free Trade Zone Customs (1990) opened (1995)

• Shanghai CCP Pudong New Area • The"one-stop"service of investment Working Committee and Shanghai project examination and approval Figure 4: Shanghai prime apartment selling price Pudong New Area Management launched (1996) Committee inaugurated (1993) RMB/sqm 200,000 Infrastructure development: Infrastructure development: Infrastructure development: 43.2% Completion of basic strategic Completion of strategic infrastructure Bring Pudong infrastructure to 150,000 infrastructure and a number of civil engineering more sophisticated level. Upgrade 72.5% 88.7% projects completed and expand existing infrastructure development 100,000

Notable investment activities: Notable investment activities: Notable investment activities: 50,000 Real-estate related: Real-estate related: Start Real-estate related: Completion of −− Signed the first land leasing construction of −− Bocom Financial Towers 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2H17 agreement for building Yu'an −− Yinguan Building −− Shanghai World Financial Tower Mansion (1991) −− Super Brand Mall (US$ 300 mil.) −− Shanghai Tower −− Shanghai Pudong granted the first Greater Lujiazui Traditional Puxi CBD −− Shanghai International Convention Business-related: commercial land at US$900 psm to Center 99 Corporation, Shanghai Shenda −− Citigroup Tower, head quarter of −− Yuanshen Sports Center Company and Huangpu Real Estate Citigroup Inc., opened Figure 5: Shanghai Grade A office rental rate Development and Management Business-related: −− The People's Bank of China RMB/sqm/day Company (1991) −− The Fuji Bank Shanghai Branch, Shanghai branch was inaugurated, Business-related: China's first foreign-funded bank, speeding up the building of 14 opened (1995) Shanghai to be an international −− The Agricultural Bank of China financial centre 19.8% Pudong Branch opened, followed −− Entrance of more big names, by set up of major specialised including: Intel Corporation, −− More than 10,000 foreign-funded enterprise settling down in Pudong banks (1990) Shanghai Siemens Communication 9 Terminal Company, Shanghai −− First large-sized joint venture in −− Approx. 100 regional headquarters Hitachi Electrical Appliances Co., Shanghai Pudong founded (1992) of multinationals were granted Ltd, (1995) certificates −− First wholly owned foreign trade −− More new big banks moved to −− Shanghai Petroleum Exchange, company set up (1992) 4 Pudong and started RMB business Shanghai Diamond Exchange, −− Jinmao Mansion Tower, the first 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2H17 pilot project (1997) China Financial Futures Exchange super high-rise building in country, −− Shanghai Securities Exchange opened in Jinmao Mansion put into construction (1994) Greater Lujiazui Traditional Puxi CBD −− The 5,000th foreign-funded −− Shanghai World Financial Center, −− Start construction of the landmark enterprise settle down in Pudong the world's highest flat roof Oriental Pearl TV Tower, a Source: JLL Research building at 492 metres, symbol of Pudong (1991), project opened (2008) completed in 1995

22 | JLL Time for Thu Thiem 23 Bonifacio Global City – Manila, Philippines

Officially being developed since 1998 Factors of success Zone Key feature Established year from a military fort, Bonifacio Global • The development is overseen by one single entity, the Fort North Bonifacio • High-class residential buildings City (BGC) has quickly become a Bonifacio Development Corporation (FBDC) modern and well-planned residential, • Park/recreation developments 1995 business and lifestyle centre. BGC’s Cresent Park West • Residential buildings (Forbes Town Center) • Lower taxes and business-friendly development started with the • Offering Economic zone and Philippine Economic Authority privatisation of a large portion of Bonifacio Centre • High-tech offices Total land (ha) Zone (PEZA), a government agency, is created to encourage Fort Bonifacio and the development • High-class residential buildings investments by providing incentives to investors in the form of of apartments, driven by demand • Retail outlets tax holidays, discounts, etc. generated by huge office developments 214 • Pedestrian-friendly roads and walkways in its established neighbour, Makati • Efficient infrastructure development, both connecting and central business district. Station Square East • Transit and pedestrian-oriented entrance to BGC inner-city, mainly developed via public-private partnership • Business convention With the idea of a “walkable city”, BGC • Retail spaces is divided into six districts with a grid system of streets, following those of University Park • Campus zone for institutions the most advanced cities in the world, • International schools which makes the city easy to navigate. • Universities At BGC, people can get instant access to Bonifacio South • First-phase luxury residential buildings green space and public transportation • Transition from suburban to urban from any point in the city. With an insightful design, the entire BGC district brings a dramatic increase in the land value. Each property in BGC is designed to heighten the quality of life and, thus, is envisioned to be appreciated over time.

BGC is a showcase for successful public-private partnership projects in the Philippines. The development of the 214-hectare project is overseen by the Fort Bonifacio Development Corporation (FBDC), which embodies the public-private partnership between the state-owned and controlled Bases Conversion and Development Authority (BCDA), Ayala Land and the Campos Group of Evergreen Holdings.

Nowadays, BGC is still developing following its master plan. It is well-known as a rising magnet for investments, a premier business address besides the existing country’s central business district, and one of the Source: Website of Area South most sought-after areas in Metro Manila for elite living and high-end commercial space.

24 | JLL Time for Thu Thiem 25 Bonifacio Global City Development Timeline

Initial Development Strong Development • Mainly infrastructure and residential • All types developed with strong influx of capitals

• Focus on Cresent Park West area, a closer part of GBC • Key developers: Mega World and Ayala Land to Makati city, to benefit from the growing demand for residential and commercial properties in this traditional Bonifacio Land CBD area Development Corporation (BLDC), led by Metro Pacific, won the bid to become BCDA’s partner A new master plan of Figure 6: Metro Manila prime apartment selling price in developing Bonifacio Bonifacio Global City was Global City launched PHP/sqm

200,000 180,000 160,000 1992 1995 2003 2006 140,000 120,000 100,000 Fort Bonifacio was Ayala Land Inc. and turned over to the Bases 80,000 the Campos Group’s 2008 2009 2010 2011 2012 2013 2014 2015 2016 2H17 Conversion Development Evergreen Holdings Inc. Authority (BCDA), a Makati Bonifacio 2011 - 2H17 CAGR bought controlling stake government-owned and BGC 7.8% in BLDC from Metro controlled corporation Makati 7.8% Pacific and, together with BCDA, formed the Fort Figure 7: Metro Manila Grade A office rental rate Bonifacio Development Corporation (FBDC), which PHP/sqm/month now oversees the master 1,200 planning of BGC 1,000

800

600

400 2008 2009 2010 2011 2012 2013 2014 2015 2016 2H17

Makati Bonifacio 2011 - 2H17 CAGR BGC 7.0% Makati 3.8% Source: JLL Research

26 | JLL Time for Thu Thiem 27 2030 Vision 2002 2008 2010 Although officially planned since 2005, it took two years to complete 2030 the first bridge, and another four years to complete the tunnel, the second connection between Thu Thiem and the city’s downtown area. Compared with Pudong or Bonifacio Global City, market factors aside, the paucity of support for infrastructure development and lack of preferential policies/ incentives are the biggest impediments 2012 2013 2014 to Thu Thiem's development. Nonetheless, it is also observed that in these cases, it took time for the initial steps to be accomplished. As soon as the infrastructure development takes shape, the market will respond. Developers will be more confident and occupiers and buyers will be attracted to this rising opportunity.

2015 2016 2017 As a late starter, Thu Thiem has the advantage of having an advanced master plan and learn from the experience of other cities. The authorities are able to introduce “smart city” schemes and Thu Thiem will become Ho Chi Minh City’s premier destination for residential and commercial development. As Thu Thiem gathers pace and becomes a magnet for investors, we strongly Sources: Photos taken from Google Earth believe the next decade will see a “Thu Thiem skyline.”

We believe Thu Thiem will become the future destination of the city and will accelerate the transformation of “ Ho Chi Minh City into a modern megacity. Yun, Sungjun Chief Representative, HCM Office, LOTTE Asset Development Co., Ltd ”

28 | JLL Time for Thu Thiem 29 Key contacts

Stephen Wyatt Country Head - Vietnam [email protected]

Khanh Nguyen Associated Director, Capital Markets - Vietnam [email protected]

Trang Le Manager, Research and Consulting Service [email protected]

Dao Phan Senior Analyst, Research and Consulting Service [email protected]

30 | JLL JLL Vietnam offices Ho Chi Minh City 26/F, Saigon Trade Center 37 Ton Duc Thang Street, District 1, Ho Chi Minh City Tel +84 8 3911 9399

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