Retailers, restaurateurs flee HCMC street spaces as rents bite

A wave of restaurants and retail chains abandoning their street spaces despite healthy business signals relentless retail rent hikes in Ho Chi Minh City, with no end in sight.

Behind Starbucks Reserve’s storefront shutdown

Last year, U.S. coffee chain Starbucks decided to shutter its Starbucks Reserve on Han Thuyen street in District 1, where it was paying VND750 million ($28,870) per month.

Less than a year later, the coffee brand opened a new store at the iconic Bitexco building in downtown HCMC, where rent reportedly runs at no less than VND980 million ($37,700) per month.

When Starbucks vacated its "dream-like" location on Han Thuyen, the company did not disclose specific reasons, only stating that it had "carefully considered all factors."

However, observers believed that the jump in rental prices, from VND700 million to VND750 million per month, was one of the key reasons behind its pullback.

They said it was not an easy decision for the renowned coffee chain to "tear down and rebuild" what had been one of its most luxurious and distinctive stores.

Starbucks Reserve Han Thuyen, which had been in operation for seven years, was once a popular spot for both tourists and coffee enthusiasts, thanks to high-grade coffee brewed by expert baristas, they explained.

Behind the exodus of well-known food and beverage (F&B) brands, along with famous restaurants, from prime storefronts in downtown HCMC lies a much larger story.

Sky-high storefront rents

In April 2025, a wave of popular, high-traffic restaurants along some of the busiest streets in central District 1 and District 3 simultaneously hung "Goodbye" signs.

From Tran Hung Dao and Hai Ba Trung, to Pasteur, Nguyen Thi Minh Khai, and Vo Van Tan street, many restaurants have closed, and numerous storefronts are now looking for new tenants.

In reality, this situation has been unfolding since the Covid-19 pandemic, but in recent months, the trend has intensified.

The sky-high rental prices for retail spaces in central areas are putting pressure on even well-performing restaurants, leading many to struggle. In some cases, landlords, believing that tenants are "profitable," have raised rents despite prior agreements.

Bui Son, operations director of a coffee brand in HCMC, said rental costs should not exceed 30% of a business’s operating expenses.

However, he said, rental prices in Vietnam’s two largest cities - HCMC and Hanoi - are extremely high, eating up as much as 50% of a business’s total operating costs.

On certain central streets, monthly rents can exceed VND200 million ($7,700), while in bustling areas, rents between VND500 million and VND700 million (26,900) are not uncommon, Son elaborated.

According to the director, to optimize costs, landlords and tenants often sign long-term lease agreements, ranging from five to 10 years, either locking in a fixed rate or agreeing to incremental rent increases every two years, for example.

They also may opt for annual lease renewals to hedge against potential business downturns, Son said, adding these flexible arrangements are typically negotiated on a case-by-case basis.

However, if business is thriving over a long period, landlords may reclaim the premises or raise rents abruptly, leaving tenants unprepared amid stable operations, Son said.

He noted that even a 10% rent hike poses challenges, while increases of 20-30% are even more daunting. Consequently, many eateries and restaurants have no choice but to relinquish their spaces despite steady customer traffic.

Meanwhile, Nguyen Ngoc Hung, a commercial leasing broker in HCMC, said current retail rental prices in the southern metropolis remain well below their 2019 peak, prior to the Covid-19 pandemic.

However, rising rental costs, coupled with escalating expenses across various operational areas, are compelling tenants to reassess their pricing strategies and customer engagement approaches, he said.

Hung held that rising prices could alienate customers, especially amid the current climate of tightened consumer spending.

Do shopping malls stand to benefit?

For the case of Starbucks relocating from its storefront to the Bitexco building with a higher rental cost, Hung explained that shopping malls are operated by a professional company with a transparent contract, clear pricing, proper valuation, and a stable customer base.

In contrast, rental prices for retail spaces often depend on the subjective preferences of landlords and are typically not pre-assessed.

Moreover, shopping malls offer high brand value, serving as places where international brands seek presence, while local brands rely on them as a 'launchpad' for visibility.

Sharing Hung’s view, Cao Thi Thanh Huong, senior research manager at consultancy Savills HCMC, said the street-front retail segment is currently facing stiff competition from modern retail formats, particularly shopping malls.

These malls offer a more diverse range of goods and services, attracting a larger consumer base, she continued.

This trend is evidenced by the launch of several large-scale malls over the past three years, including Thiso Mall Sala, Parc Mall, Vincom Mega Mall Grand Park, and Centre Mall Vo Van Kiet, all of which achieved occupancy rates of at least 70%.

In contrast, vacancy rates in street-front retail spaces have been rising, highlighting a shift in consumer shopping habits and the growing appeal of modern retail models.

According to Trang Bui, general manager of Cushman & Wakefield Vietnam, a leading global real estate services firm, retail brands, from luxury to mass-market, are increasingly investing in physical stores at strategic locations to showcase products and capture consumer attention

While e-commerce plays a key role in multichannel strategies, traditional stores remain the true touchpoint for connecting with customers, she further explained.

Trang said many international brands seek 'community' through shopping malls, where similar brands are located, making it easier for them to target the right customers and solidify their position.

This is the primary reason why shopping malls remain popular, she said.

For the issue of vacant spaces, Hung noted that even with price reductions, many properties remain empty, as attracting tenants is challenging amid changing consumer behavior and tightening spending trends.

Meanwhile, aside from large chains, almost no brand owners are "brave enough" to invest heavily in rental costs for expansion at this time, which has forced property owners to either adapt or face lost revenue from unoccupied spaces.

Landlords simply need to adapt, understand consumer behavior, and properly assess the value of their space - tenants will come, Hung suggested.

Certain types of services, like beer halls or seafood restaurants, can’t operate inside shopping malls, he said, stressing the key lies in finding common ground.