With the entry of foreign brands, shopping centers in Hanoi and Ho Chi Minh City witnessed a steady increase in rentals and occupancy rates in the year’s first quarter.
Leasing activities were dominated by foreign brands’ expansion across diverse sectors, ranging from fashion and dining establishments to supermarkets, primarily concentrated in Vietnam’s top two metropolises.
Two luxury fashion labels, Rene Caovilla and The Hour Glass Opera, opened respectively at Union Square in HCMC and 63 Ly Thai To in Hanoi.
HCMC also welcomed new mid to high-end international brands like Fendi, Cartier and Loewe.
According to a Q1 report by property advisory firm CBRE, retail property rentals in Hanoi and HCMC have maintained an upward trend due to limited new supply since 2020.
In Hanoi, the asking rent for the ground floor in the central business district (CBD) area was $163.2/square meter/month, representing a 13.4% increase year-on-year. The vacancy rate in the central area decreased to 1.7%, down 3.1 percentage points (ppts) year-on-year.
Meanwhile in HCMC, the average rents quoted at prime locations reached $240/sqm/month, up 1.8% year-on-year. The vacancy rate in the central area stood at 4.7%, down 1.1 ppts from Q1/2023. There was almost no vacant space in the CBD area of both cities, the report said.
In non-CBD areas, both Hanoi and HCMC have experienced good rental growth this year. The asking rent for non-CBD areas in Hanoi reached $30.6/sqm/month, up 13.9% year-on-year.
The first quarter saw Hanoi welcome a new project, The Linc complex, in the Park City Hanoi urban area, with a rental area of 10,581 sqm.
Meanwhile, in HCMC, the non-CBD area rentals soared 23.7% year-on-year to $53.3/sqm/month, due to restructuring by some shopping centers.
The average occupancy rates for the market as a whole in Hanoi and HCMC stood at 89% and 90%, respectively, a slight increase compared to the previous year.
A Savills Vietnam report says retail occupancy remained sound, flat quarter-on-quarter and up 1 ppt year-on-year to 92%. Vincom Plaza 3/2 closed more than 28,000 sqm of net leasable area for renovation, driving the increase.
Small modern retail supply with strong local consumption and increasing middle class will support market growth, the report cited Savills analysts as saying.
They noted that although certain small retailers have closed shop, there was a trend of brand expansion (Muji, H&M, Uniqlo, Poseidon) and new mid to high-end international brands (Fendi, Cartier, Loewe) entering the market.
Giang Huynh, head of research & S22M, Savills HCMC, commented that modern retail space was likely develop further, thanks to demographic factors and rising disposable income.
Vietnam’s retail sales of goods and services reached VND270 trillion ($10.63 billion) in Q1/2024, up 12% year-on-year, according to government data.
Despite economic challenges, CBD commercial centers have shown resilience, maintaining relatively stable occupancy rates, said Thanh Pham, associate director of CBRE Vietnam.
“Any vacant spaces are being filled promptly by replacement tenants. This trend indicates a growing inclination towards attracting larger tenants to these centers, aiming to offer shoppers diverse experiences and comprehensive additional services,” Thanh said.
CBRE anticipates total average new supply in Hanoi and HCMC at around 65,000 sqm per year in the coming years, 57% lower than the average of the past ten years.
New supply and completion of several large-scale projects will contribute to less severe scarcity compared to previous years. As such, CBRE predicts that rentals will continue to increase, but at a slower pace – by 2-3% in non-CBD areas and 5-8% in CBD areas.