The retail real estate market is displaying signs of optimism after quarantine restrictions were eased.
Even after a protracted period of closure, retail space rentals in Ho Chi Minh City remained stable in Q4/2021, as assessed by Colliers Vietnam.
In the central area of the city, the average retail space is $115 per square metre per month, while the average vacancy rate is about 5 per cent. Meanwhile, in areas outside of the city centre, the average rent is $24.50 per metre, with vacancies at about 14 per cent.
Signs of recovery were echoed as Ho Chi Minh City welcomed its 10th UNIQLO shop in AEON Mall Binh Tan.
Retail space for rent in Hanoi remains at more than $43 per square metre on average. Rent in the city centre is recorded from $98, while the average vacancy rate is 11 per cent. Further out, rents start at $21 per month with 18 per cent vacant.
According to CBRE Vietnam, the Hanoi market has witnessed the entry of a number of new fashion and cosmetics brands, as well as the expansion of renowned domestic and foreign businesses, such as Dyson, Sandro, and Maje.
In order to adapt to the new normal, long-term tenants have restructured their business models. Many large food and beverage stores have been converted into mobile kiosks to better serve their customers’ needs. The number of permanent rental spaces in supermarkets and convenience stores has been reduced, while the number of temporary booths has been expanded to enhance the buyer-seller experience.
Danang’s retail market, meanwhile, is also showing signs of recovery after two years of hibernation. Compared to April 2021, the demand for real estate in the city has recovered by nearly 70 per cent. With a number of new projects in the pipeline, this market is looking to welcome tourists and investors back.
The retail industry rebound
Colliers Vietnam believes that while some foreign businesses were forced to withdraw from the Vietnamese retail market, most notably Top Shop and Hard Rock Coffee, opportunities for domestic competitors have also been created.
While Con Cung and Saigon Co.op are seeking to boost their market share, Nutrifood is also set to open 200 outlets in Ho Chi Minh City in the near future.
Across a broader spectrum, retail chains Winmart and Winmart+, which together have more than 2,500 points of sale, are accelerating their collaboration with The CrownX.
Recent announcements from Masan also indicated that the company aims to build a Point of Life destination, an all-in-one platform providing essential goods via both direct and online channels.
In addition, a leading low-cost supermarket chain in South Korea, Emart has opted to open franchises in Vietnam. Last May, they signed an agreement to transfer exclusive franchise rights to Thaco. The new owners of Emart Vietnam plan to open 10 supermarkets by 2025.
Leading Japanese retailer AEON Group considers Vietnam a vital market and is executing its medium- and long-term strategy here. It is now operating six facilities in the country, with plans on expanding to 25 by 2025.
Thai giant Central Retail has also signalled its ambition to expand its business in Vietnam by investing in four shopping centres. The company has just inked an agreement with Kido Corporation to bring the food and beverage chain Chuk Chuk into their Go! supermarkets. Meanwhile, Big C and Tops Market have also promised to provide consumers with new experiences.
“Although 2021 was a challenging year, 2022 is envisaged to be a prosperous time for retail real estate,” CBRE forecasted. Clear signs of recovery, especially at the end of last year, are reflected in the robust increase in shopping traffic and retailers’ expectations for new projects.
CBRE Vietnam predicts that the average retail space asking price in the Hanoi market will grow by 1.5 to 2 per cent this year, while the vacancy rate will increase by 3 percentage points.
After the pandemic, many businesses, especially those in the fields of fashion and cosmetics, want to open large-scale stores in prime locations in the center of Ho Chi Minh City.
Foreign retail businesses are adopting a multi-channel sales strategy as well as improved operations and delivery services to expand Vietnam operations despite pandemic impacts.