Many trade centres in Hanoi are about to come into operation. Attracting and maintaining renters will be a difficult task for these fledgling trade centres.
According to CBRE Vietnam’s representative, Hang Da market has long-term leases on all of its stores. Pico Mall plans to open in April 2011, and now has 70 percent of its space rented. Established centres like Vincom and Trang Tien Plaza are also conducting renovations to meet further demand of customers. As such, there will be a large supply of retail space entering the market in the coming time. Meanwhile, some existing centres still have difficulty in leasing their space. This means competition among owners will be much tougher and clients of later retail space projects will have to be more careful.
Major trade centres lower rental fees
On prime land in South Hanoi, Grand Plaza is known as the most high-ranking 5-star trade centre in Hanoi. It is assessed by specialists as a perfect place for retailers to spread their trademark and access potential clients including residential citizens, officers, tourists, and foreigners working and living in areas such as The Manor, Trung Hoa - Nhan Chinh or in high-class apartments, offices, and hotels in mixed use development areas like Keangnam Hanoi, Landmark Tower, CEO Tower or JW Marriott Hotel, which are now under construction. Rental fees of US$30 to US$80 per sq. m per month are considered compatible prices in comparison with other commercial centres in urban Hanoi.
However, after some period of operation, a representative of Grand Plaza admitted that the filling rate of this trade centre was not as good as others such as Parkson or Vincom. The same is true with The Garden, a high-ranking commercial centre which was put into operation two years ago. Taking a walk around the shopping centre, it is clear that a lot of space remains unoccupied and even buyer quantity is still far from expectation. The question is why these commercial centres are not truly attractive to customers even though they own advantages of convenient positions with such a huge investment capital. "Most Vietnamese retailers are small and medium enterprises. Well-known brand names which are capable of satisfying all requirements of these centres are mostly foreign. Therefore, few retailers could enter these huge centres," says Doctor Dinh Thi My Loan, General Secretary of Vietnamese Retailers.
Mr Richard Leech, Managing Director of CBRE Vietnam, believes that these investors are a little bit too hurried and have not gained thorough understanding of the market as well as their market segment. “Despite high price, shopping malls located in central areas are still first choices of well-known brand names since customers are more highly concentrated here than in suburban areas. Shopping malls out of central areas, therefore, need long-term and more practical vision in their advertisement and renting campaign,” emphasizes Mr Richard Leech.
And in order to find a solution to this issue, in the very first days of March, Grand Plaza made the decision to reduce rental fees up to 50 percent in the first year, 40 percent in the second year and 30 percent in the third year. Mr Nguyen Dinh Chung, Marketing Director of Grand Plaza, says that this is a new step in the marketing strategy of the company which aims at attracting customers. Despite a decrease in prices it offers, Grand Plaza still maintains its policy that only high-ranking brand names can “join” Grand Plaza. The assessment procedures are strictly conducted and take about one month. And according to Mr Chung, this is also a reason keeping customers away from Grand Plaza.
And the solution for followers
Vietnam’s retail market is forecast to be still very active in 2011. In the time to come, many more commercial centres will come into operation. However, will later comers draw lessons from their predecessors like The Garden and Grand Plaza?
Most recently, Savico Hanoi has introduced its project, Savico MegaMall. According to Savico, this will be the largest commercial centre in Vietnam, constructed according to a Northern American model. The mall will be in Long Bien District and come to operation the end of this year. It is admitted that Savico MegaMall has a favourable location, lying on Nguyen Van Linh transport route, just 5km from Hoan Kiem Lake and connecting central Hanoi with the most dynamic economic regions in the North, including Bac Ninh, Hung Yen, Hai Duong and Hai Phong. The mall can also be easily accessed via Vinh Tuy and Thanh Tri Bridges from various Hanoi districts, including Hai Ba Trung, Hoang Mai and Thanh Tri. Mr Richard Leech states that with the favourable location of Savico MegaMall, it is not difficult to attract renters, but it is important to keep such renters. As a sole retail agent of Savico MegaMall, Mr Richard Leed affirms that attractive rental fees will be offered right from the beginning. “This is a really different approach from other commercial centres which usually set high prices in the beginning and only lower price when the number of renters does not meet their expectations,” he said.
From the client perspective, Mr Pham Manh Cuong, General Director of Savico Hanoi, also affirms that Savico MegaMall is not a project which has been implemented quickly, but with thorough study. In the short term, the mall will serve the shopping demand of the over 100,000 inhabitants of Long Bien district. Savico has also thought of setting bus routes to the mall for customers, like Melinh Plaza is doing, if necessary.
It is obvious that later investors like Savico have taken thorough preparations in order to draw customers to their commercial centres. However, in an interview with a journalist, a representative of Knight Frank also forecast that retailers are demanding more and more, putting forward higher requirements for location and store design. Traders of retail space must provide a more nuanced understanding of customer taste at each stage.
Vietnamese
