Quarter III of 2011 saw no change in retail rent costs in Hanoi, but a light decrease in that of Ho Chi Minh City. The survey conducted by two market research companies, CBRE and Knight Frank, showed that retail sites would face pressure to reduce costs in quarter IV of 2011 and even in quarter I of 2012, given a dramatic increase in supply.
Supply keeps increasing
At the end of November 2011, Crescent Mall Plaza in Phu My Hung 9 (District 7, Ho Chi Minh City)’s opening added 45,000 square meters to the area’s total retail space of 658,000 square meters in quarter III in Ho Chi Minh City. Besides, the commercial floors of Bitexco Finance Tower and Kumho Link buildings opened in quarter IV added considerably to available luxury retail area. According to Knight Frank, retail site supply from projects in Ho Chi Minh City in next five years will increase the total area to over 1,680,000 square meters.
According to the survey by CBRE, in quarter III of 2011, total retail area in Hanoi was 134,500 square meters, in which Hang Da Galleria Plaza put into operation 6,600 square meters. However, in quarter IV of 2011 and quarter I of 2012, a series of completed retail sites will put more pressure on projects. In particular, Keangnam project was 97,000 square meters, while that Savico Mega Mall was 63,400 square meters and Vincom Centre Long Bien was 45,00 square meters.
Increasing inflation and hard economic times have cut the number of customers coming to shopping malls by 10-30 percent. Knight Frank forecast continued difficulties for the retail market until the next Lunar Tet holiday. In fact, there have been many retail renters making unusual efforts to deal with difficulties when retail sales went down but rent costs took off. CBRE supposed this is the moment for renters to have more options in negotiations to get appealing contract provisions when moving to new locations.
Long and medium-term prospect
Newly opened Crescent Mall Plaza was supposed to be rented to 70 percent of capacity with brands such as Giant Supermarket, Megastar Cinemas, TiniTown, Gap, NikeTown and Entertainment Corporation 101. However, these brands are facing pressure since there are only a small number of customers in the initial time. Luxury retail sites have shared the same difficulty in the past time as hard economic conditions cut into people’s spending. This is reflected through retail rent costs in Hanoi in the survey by CBRE in quarter III of 2011: retail site’s average rent in central areas has decreased by 4.3 percent against last year, while that in non-central areas has increased.
Nonetheless, the number of customers coming to retail areas selling food, household appliances and consumer goods still increased. Even in the hard economic context, consumers seek those at medium price as alternatives to luxury goods. This retail sector is now rather busy when a variety of brands has implemented their plans in Vietnam. In September 2011, Lotte Mart announced a US$50 million increase in capital in Vietnam and the opening of the third supermarket in near future. This firm planned to open 30 supermarkets and plazas in Vietnam by 2018. Another Korean retail brand, E-Mart, has also joined hands with U&I Corporation in Vietnam to open 52 supermarkets, stores, distribution centres with capital of US$1 billion by 2020. The Asian investment wave in retail is showing up in Vietnam instead of brands from American and Europe. This helps to boost retail sites out of luxury plazas in coming years.
Convenient retail store chains are heated with participation of brands from Japan. Familymart, in association with Phu Thai Group, will open about 300 stores in the next 3 years. Aeon, another Japanese convenience store brand also plans to enter the Vietnam market in 2013. Japan is a powerful country in convenience stores. When strong brands in this field penetrate Vietnam, demand for retail sites in central areas will increase.
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