Shifting trends: A shopping mall in Ho Chi Minh City. Business organisations say consumer confidence has been weaker so far this year. — Bloomberg
HO CHI MINH CITY: The affordable and mid-range segments will remain pivotal in Ho Chi Minh City’s retail property this year, experts say.
Thanh Nguyen, head of research and consulting at property consultants CBRE HCM City, said, “In response to consumer preferences, landlords are refining their tenant mix to focus on categories like food and beverage, fashion and accessories, lifestyle, and entertainment. This trend is expected to persist this year, catering to consumers of all age groups.”
Due to economic challenges, many retailers have had to close their stores.
According to CBRE’s records in the first quarter of this year, new stores opening in Ho Chi Minh City accounted for 6%, while the number of stores that closed accounted for 11% of total transactions.
Shopping malls in non-central business district areas faced increased vacancy, it added.
In the HCM City Business Association’s recently released report for the first quarter of this year, the association highlighted numerous challenges in business operations that have weakened consumer confidence.
Consequently, CBRE noted stores in food and beverage, fashion and accessories, healthcare and beauty, and entertainment sectors closed during the quarter.
This led to a 61.6% quarter-on-quarter (q-o-q) decrease in net absorption in Ho Chi Minh City to 6,322 sq m.
The retail-market average vacancy rate slightly increased from 6.9% at the end of last year to 7.1% in the first quarter of this year, with the central-business-district (CBD) area at 5% and the non-CBD area at 8.5%.
This marked increases of 0.21% and 0.7%, respectively.
Leasing transactions in the quarter mainly came from the food and beverage segment, accounting for 35% of total transactions, fashion and accessories for 20%, and lifestyle for 16%.
In terms of supply, CBRE reported that in the first quarter of this year, the retail market in Ho Chi Minh City welcomed a new shopping mall in District 6 – Centre Mall, situated on Vo Van Kiet Street – offering nearly 15,000 sq m of net leasable area.
Upon its opening, Centre Mall reported a 75% occupancy rate, featuring notable brands like MR DIY, Trung Nguyen Legend, Highlands Coffee, Fahasa, Poseidon, Chang Kang Kung and Cinestar.
In a report, property consultants Cushman & Wakefield said that total retail supply in Ho Chi Minh City reached 1.2 million sq m, marking 1.27% growth q-o-q and an 11.43% increase year-on-year (y-o-y).
Notably, it said new retail malls were consistently being introduced in districts outside the central areas, offering a wide array of business models.
The trend was gradually transforming traditional street-front retail, which is under significant pressure from the growing eCommerce sector.
Projections indicate that the Ho Chi Minh City retail market will see an influx of approximately 38,000 sq m of new retail space this year.
This will be followed by nearly 80,000 sq m in the subsequent two years, according to the report.
Despite the incoming supply, high-quality retail spaces in prime locations, which are in high demand from food and beverage and entertainment businesses, will remain limited.
The constrained supply results in fierce competition for available space and poses a notable challenge for major brands looking to grow their footprint in the Ho Chi Minh City market.
While the average rent decreased by 4.43% y-o-y, it did register a marginal increase of 1.42% compared with the previous quarter, reaching US$53.48 per sq m per month.
The growth signals a slow but steady recovery in demand for retail space, primarily due to the limited supply of expansive shopping centres.
Moreover, the changing dynamics of shopping and entertainment preferences towards mall environments have yielded positive shifts.
This is notably seen in the increased popularity of shophouses within shopping centres, a stark contrast to their underperformance along streets outside the central business district.
CBRE reported the average asking rent in the CBD area was at nearly US$280 per sq m per month, up 15.4% y-o-y, but unchanged from the previous quarter.
The average asking rent in the non-CBD area decreased by 1.4% q-o-q and 1.2% y-o-y, recorded at US$52.6 per sq m per month.
In recent years, newly opened shopping malls in non-CBD areas often offered attractive asking rents, with ground-floor rents below US$25 per sq m per month in some cases. — Viet Nam News/ANN
