HCMC retail space awaits occupants

More and more vacant retail space across Ho Chi Minh City, the busiest city in Vietnam, is looking for renters.

High rents and consumption habit changes are said to be the main reasons for the situation.

Phan Quoc Thang, who runs a retail shop in the city, said retail rents have tended to increase recently, especially after the Covid-19 pandemic.

"Many property owners have raised rents by at least 5%. While consumers spend less and business activities diminish, many people could not cover their costs and had to stop doing business,” he said.

Meanwhile, Phan Thuan, manager of shops selling an entertainment brand for young people in Districts 10 and Binh Thanh, said it is difficult to find people who share business premises because of high rents.

"After stabilizing business at our branch in District 10, we expanded the model to Binh Thanh. However, the property owner only wants to rent out the whole space, which we can't afford. I'm looking for someone to share the premises. If I can't find anyone, I'll have to close my business," he said.

According to Trang Le, head of research and consulting at JLL Vietnam, the retail real estate market in Vietnam in general and in HCMC in particular is being affected by three main factors, namely demographic changes, e-commerce development, and changes in consumer behavior.

Two-generation household popularity and increased income have provided young people with conditions to live independently and determine their own spending habits, she said.

In addition, demographic changes among the 2020s, with Generation Z featuring those born in 1997-2012 and middle-aged people gradually becoming the main consumers, have also helped shape demand for retail trade in general and commercial real estate in particular, she analyzed, adding that changing consumption habits have had a strong impact on the retail market.

Strong development of the Internet and social networks have created multi-channel sales and established new ways of consumption, especially among young families. There are many forms of online sales like via e-commerce platforms including Shopee, Sendo and Lazada or social networks like Facebook, Zala and Tiktok, providing buyers with more choices.

However, Trang Le noted that the retail sector is believed to develop in the long run as Vietnamese people's living standards are gradually improving, resulting in higher spending demand.

She cited a report by global management consulting firm McKinsey & Company as saying that the percentage of Vietnamese with basic consumption (about $11-30 per day) increased from 16% in 2010 to 36% in 2020 and is expected to reach 54.8% in 2030.

Meanwhile, the rate of those with high consumption (more than $70 per day) rose from 1% in 2010 to 4% in 2020 and is estimated at 19.2% in 2030. With such a growth rate, in the next decade, about 36 million Vietnamese consumers are expected to join the middle class, pushing up spending demand in big cities like Hanoi and HCMC.