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[Market News] Retail Space Leasing Market Gradually Warms Up
The retail leasing market is warming after two years of pandemic-related stagnation and is expected to become more active toward year-end.
Over the past two months, Vietnam has seen many new retail stores open. Uniqlo Vietnam launched two stores of several thousand square meters in Hai Phong and at Saigon Centre in Ho Chi Minh City. Homeware brand Muji opened its third Hanoi store, measuring 1,700 sq m. Handbag brand Desino returned to Takashimaya shopping center in Ho Chi Minh City, while jewelry brand Pandora recently opened a new store in Hanoi. More foreign brands may enter Vietnam this year, according to Savills Vietnam.
Demand for Retail Space Is Rising
The growing number of retail stores in busy urban districts and shopping malls has helped the retail leasing market recover.
Tran Pham Phuong Quyen, Head of Retail Leasing at Savills Vietnam, says demand for retail space has increased as many businesses plan to expand. New formats, including central kitchens, satellite distribution outlets and multi-brand stores, are adding momentum.
Signs of recovery in retail are expected to lift demand for space to open new stores in the coming months.
According to Quyen, e-commerce remains active because consumers have retained online shopping habits developed during two years of the pandemic.
Some successful online retailers are opening physical showrooms and stores to strengthen demand for their products and improve the customer experience. Shoppers can compare products and prices online, inspect goods in person and buy through whichever channel is most convenient.
In other words, the online-offline model adopted by many retailers is also helping the market for retail space warm up.
Signs of recovery in retail are expected to lift demand for space to open stores, while asking rents are likely to edge up.
Rents and Leasing Policies Are Changing
According to the Ministry of Construction, commercial and retail space showed positive signs of recovery in the first quarter of 2022 after severe disruption from Covid-19.
Major domestic and foreign retailers, including MM Mega Market, AEON Mall, Central Retail, Saigon Co.op, Winmart and The Gioi Di Dong, are expanding their networks and store sizes compared with late 2021, increasing demand for commercial space.
Consequently, occupancy at major shopping malls and supermarkets rose slightly from the fourth quarter of 2021 and remained high at around 90–95%, supported by landlord incentives. Street-front retail stores have also gradually reopened, and closures and transfers are less common than in previous quarters.
The Ministry of Construction reported average asking rents for ground and first-floor retail space of about VND 550,000 per sq m per month outside central Hanoi and VND 2.5 million in central Hanoi. Corresponding figures for Ho Chi Minh City were VND 850,000 and about VND 3.1 million per sq m per month.
Commercial property management firms also reported trends consistent with the Ministry’s retail-space findings.
Savills Vietnam reported average occupancy of 92% in Ho Chi Minh City in the first three months of the year. Average asking rent rose 3% both quarter-on-quarter and year-on-year to VND 1.2 million per sq m per month. In central projects it approached VND 3 million. Landlords also lengthened minimum lease terms and introduced annual rent increases of up to 10%.
JLL experts likewise estimated that effective rents at prime shopping malls rose 1.3% quarter-on-quarter in Q1 2022 to USD 41.5 per sq m per month, excluding VAT and management fees, returning to pre-pandemic levels. Although landlords have withdrawn broad tenant-support policies, they remain willing to negotiate assistance case by case.
According to Colliers Vietnam, average rents were USD 102 per sq m per month in central Ho Chi Minh City and about USD 28 outside the center. In Hanoi, central-area rents averaged from USD 92 per sq m per month, versus about USD 21 in non-central areas.
Brands are quietly expanding their store networks, making the commercial leasing market more active, especially in Ho Chi Minh City. Unlike before, however, rents are now rising mainly in outlying areas.
Savills Ho Chi Minh City cited experts and real estate consultants who said retailers are opening across districts and neighborhoods rather than focusing only on tourist-heavy Districts 1 and 3. This explains why rent increases are concentrated in non-central projects.
Shopping centers whose openings were delayed by Covid-19 are also restarting their projects. If they open soon, the supply of retail space will become more varied.
Jones Lang LaSalle (JLL) expects new supply in good locations with sound leasing strategies to lift average rents as the economy recovers. Rents at existing shopping malls may also increase slightly alongside expansion by emerging retail chains. Food and beverage businesses, convenience stores and pharmacies were forecast to lead demand for the remainder of 2022.
Source: Saigon Economic Times
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