Middle-class demand drives retail rental market in HCMC
Demand from the growing middle-class is providing support to the stability of the retail rental market in Ho Chi Minh City amidst the challenges faced by the real estate sector, Savills Vietnam said in a note.
Savills Vietnam's third-quarter market report highlights that food and beverage, fashion, health and beauty, and entertainment sectors took the most new lease transactions.

A view of the Thiso Mall Sala in Thu Thiem, Thu Duc city, HCMC. Photo courtesy of Savills Vietnam.
“Significant demand for dining, shopping, and entertainment activities by the middle class is supporting the expansion of these sectors,” it noted.
Savills experts say there is significant untapped potential for further growth, given the limited supply in HCMC with nearly 10 million inhabitants.
Cao Thanh Huong, senior manager of Savills HCMC's research department, expressed optimism about the positive economic growth in the country, which is encouraging new brands to expand their presence in non-central areas.
Steady retail rental landscape
A market report by Savills HCMC showed that retail property in Vietnam’s largest city remained remarkably stable during the first nine months of this year, with a slight decrease in retail stock.
The total floor area available for retail rentals stood at approximately 1.5 million square meters. The decrease was attributed to the conversion of some retail projects into office spaces or their outright sale.

Retail performance in HCMC in Q3/2023. Source: Savills HCMC Market Report.
Occupancy remained steady and high at around 91% while rental prices fluctuated. In non-commercial business district (CBD) areas, rents had a quarterly increase of 1%, reaching VND1 million ($41)/sqm per month. Rent trended upward as Pandora City and Cantavil Premier, which previously offered more affordable rental rates, withdrew from the market.
Meanwhile, rental prices in central areas of the city remained high, with rates soaring up to VND3.3 million ($134.7)/sqm/month, three times higher than in non-CBD areas.
Giang Huynh, associate director of Savills HCMC’s Research & S22M Services, emphasized the unique characteristic of the city's market that is the substantial price disparity between central and non-central areas.
“Rental prices in central areas consistently remain high due to the limited stock, which accounts for less than 10% of the total market stock. Simultaneously, brands and businesses have high demand for space in the city center. This has emboldened landlords of CBD projects to maintain high rental rates and occupancy levels,” she said
Occupancy fell from 100% in 2010 to 80% in the third quarter of 2023. Rent has also dropped 6% per annum, to VND0.8 million ($32.6)/sqm/month.
The decrease was driven by the concentration of retail podium stock in the inner-city and suburban areas within low to mid-range apartment projects. Suboptimal designs and inefficient marketing efforts by retail podium operators have partial blame.
The outlook for 2024 includes the introduction of new supply from four projects, with some planning renovations and changes to their tenant structure to revitalize the retail cycle, Savills HCMC said.
According to a Savills Global study, the urban population is forecast to double by 2050, constituting 70% of the world's population. While rapid urbanization presents significant housing and infrastructure challenges in developing countries, it also offers opportunities for real estate investors seeking rental growth.
Notably, in the Asia-Pacific region, including Vietnam, many areas are poised for continued remarkable growth, driven by a youthful population and rising incomes, factors that will continue to stimulate the commercial real estate market.
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