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JLL: Thu Thiem to relieve HCMC's infrastructure challenges

Released at: 14:59, 24/11/2017

JLL: Thu Thiem to relieve HCMC's infrastructure challenges

New urban area development should ease the problems besetting HCMC's existing CBD, according to latest JLL Vietnam report.

by Ngoc Lan

Thu Thiem, the proposed financial district and mixed-use urban area in Ho Chi Minh City, is set to become the largest inner-city development in Southeast Asia and ease the city’s infrastructure challenges, according to the latest report from JLL Vietnam.

Infrastructure within Ho Chi Minh City’s existing CBD is starting to buckle under the pressure of rapid expansion over the last three decades.

The undersupply of Grade A office stock in the CBD is pushing rents higher, reaching levels not seen since 2008, JLL Vietnam’s data reveals.

Traffic congestion has increased over the last five years, with the number of motor cars rising 35 per cent annually from 2012-2016, according to the Vietnam Automobile Manufacturers’ Association (VAMA).

Mr. Stephen Wyatt, Country Head at JLL Vietnam, said the master plan for Thu Thiem is set to alleviate the lack of supply faced in the existing CBD. “As infrastructure improves within Thu Thiem, we anticipate that larger firms will start considering it as a viable alternative to the existing CBD and set up their head offices there,” he added.

Major developers such as Keppel Land have already set their sights on Thu Thiem, entering into a joint venture with local Vietnamese partners in 2016 to develop a prime waterfront site with premium residential apartments and office and retail properties.

Thu Thiem also faces many challenges, however. While the majority of land has been allocated, several empty sites remain for developers and investors, with Thu Thiem’s sheer size posing several challenges.

Its developable area consists of 176 land parcels. This includes approximately 3.4 million sq m of commercial space and 3.2 million sq m of residential space for a population of 145,000.

“It is critically important that developers pay careful attention to market conditions as well as supply and demand dynamics, to limit the risk of oversupply in the future,” said Mr. Wyatt. “It is inevitable in a large mixed-use development site that the area will be a construction site for many years. Developers and purchasers of residential property will need to be mindful of this fact when investing in Thu Thiem.”

There remains a gap in the market for school operators. According to the Thu Thiem master plan, ten land parcels have been set aside for schools, but the current lack of infrastructure and residential communities has meant a modest take-up rate from school operators so far.

A lack of preferential policies and incentives also count among the biggest obstacles to the speed of Thu Thiem’s development.

“In order to speed up development activity we would like to see the creation of a special ‘economic zone’ with less bureaucratic red tape, which would create a favorable environment,” Mr. Wyatt said. “A sound legal and planning system would also catalyze the area’s development for investors and developers.”

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