15/09/2016
SPOTLIGHT: DANANG MARKET REPORT 1H2016
1. Overview
The long white sandy beaches and temperate climate of Viet Nam’s central coast provide the closest logical destination for north Asian tourism. It’s a short distance to many key feeder cities throughout Japan and Korea, and very near two of the world’s largest tourist source locations, China and Russia.
Recreation and Cultural links are very strong. There are already three international golf courses (Norman, Montgomerie and Faldo) on the Da Nang ‘golf coast’, with plans for another five within the next two years. The central coast also has the UNESCO Cultural Heritage Sites of Hoi An Ancient Town, My Son Sanctuary and the Imperial City of Hue.
The Provincial Competitiveness Index (PCI) is an annual business survey, assessment and ranking of the economic governance quality of provincial authorities in creating a favourable business environment for development of the private sector.Da Nang has been ranked number 1 for three years in a row. It is a progressive city, and open for business.
Figure 1 - Economic Growth and Income
Source: Da Nang City Statistical Office
Vietnamese residential requirements are changing;
· Household occupancy, once one of the highest in Asia is falling rapidly, creating a greater need for housing diversity.
· Second homes and lifestyle choices are becoming commonplace.
· Good growth of the middle class and even stronger growth of the affluent class
Figure 2 - Tourism Arrivals
Source: Tourism departments in Da Nang, Khanh Hoa, and Kien Giang
Balanced development between tourism and industry is a priority for Da Nang. Foreign direct investment (FDI) is not welcome in heavy industries causing pollution. Preferred FDI projects are weighted toward tourism, trade, high-tech and information technology.
Figure 3 - Registered FDI
Source: Da Nang City Statistical Office
2. Market Landscape
Da Nang offers investors well developed and complete infrastructure and good urban planning. Functional satellite areas are forming; the northwest coastal area takes advantage of the natural landscape to develop eco-tourism, while the conventional urban area develops toward a hub of trade, finance and education. The east coastal area is highlighted for hospitality and in the south a mega township and tourism is slated for development.
Figure 4 – Golf Course, Existing and Planned
Figure 5 – Key trends and drivers
3. Retail
At 2016 Danang’s modern retail density was 0.15m2/person, similar to other Vietnamese cities but substantially lower then regional peers such as Jakarta, Kuala Lumpur and Bangkok. There is room for further growth over the long-term as Da Nang continues to evolve.
Figure 6 - Retail Market Supply (m2/person)
Source: Savills Research & Consultancy
The Da Nang retail markets best performance was in 2015. Occupancy was 88%, 18 ppts higher than 2014 and 10% ppts higher than 2011. Average rent reached US$22/ m2/mth, increasing 29% year-on-year (YoY) and unchanged versus 2010.
Figure 7 - Retail Market Performance
Source: Savills Research & Consultancy
4. Office
Da Nang’s office stock reached 86,490 m2 in 2015. Grade A provided approximately 6,310 m2 from a single project, accounting for 7% of total office space, largely overshadowed by Grade B at 46% and Grade C at 47 percent.
Figure 8 - Grade A Performance
Source: Savills Research & Consultancy
Da Nang’s office market had soft performance from 2010-2015. Over the last six years, Grade A occupancy improved, to 62% in 2010 and 97% in 2015. Average Grade A rent remained stable and reached US$18/m2/mth in 2015.
Figure 9 - Office Market Supply
Source: Savills Research & Consultancy
5. Hotel
Da Nang is one of the twenty ‘cleanest cities’ in the world and the ‘most livable city’ in Viet Nam. Offering plenty of beautiful natural and cultural destinations, Da Nang is the tourist capital of Central Viet Nam.
In 2015, there were seventy three, 3 to 5 star hotels with 8,485 rooms, of which seven of the eleven 5-star hotels and four of the fourteen 4-star hotels were managed by international operators. There remains room for increased international operator presence. Accor Hotels and Resorts Group is the largest international operator in Da Nang, managing approximately 944 rooms.
Figure 10 - Hotel Supply
Source: Savills Research & Consultancy
Major upcoming hospitality projects include Crowne Plaza Phase 2, Hilton Danang Hotel, and Four Points by Sheraton. The $4 billion Hoi An South casino resort expected to be put into partial operation by 2019 will create a huge push for the formation of hospitality strip from Da Nang to Hoi An.
Figure 11 – Major projects
In 1H/2016, total visitor volume was up 28% YoY and domestic visitors up 4% YoY.
6. Second Home
Da Nang has pioneered luxury coastal homes and is second (behind Nha Trang) in total stock with 1,199 villas and 3,367 apartments. Surveys have shown that more than 80% of purchasers are from Ha Noi, attracted by wide a variety of products, completed infrastructure, bright tourism prospects and sales policies, and the image of a young, dynamic and green city. Successful cases include Ba Na Hill, Ocean Villas, Hyatt Regency, Furama, Intercontinental, and Azura. Large-scale upcoming projects include Soleil Da Nang, Coco Bay, Da Phuoc, Han Riverside, Ariyana, Central Coast, Vinpearl Han River, and Ocean Suites & Estates. A large future supply of apartments and coastal villas is expected.
Figure 12 - Residential Supply Structure
Source: Savills Research & Consultancy
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