Movement observed among both local and foreign retailers during the review quarter.
In the first quarter of 2015, retail market performance started to pick up after a long period of stagnation according to CBRE’s quarterly report on the Hanoi market, released on April 3. For the first time since the second quarter of 2013, average asking rents increased slightly by 0.7 per cent in the first three months of 2015 on a quarterly basis, up to $37.40 per square meter per month.
This improvement was mainly driven by shopping centers in non-CBD areas. While there were a few projects that managed to ask for marginally higher rents, the majority of retail projects kept their prices stable. Average vacancy rates declined for the first time after four consecutive quarters to 18.6 per cent. The huge amount of supply in the pipeline of retail space among residential projects in non-CBD areas in coming years should give caution to existing and upcoming shopping center operators as further pressure is expected on both rental rates and vacancy levels.
“During the review quarter, movements were observed from both local and foreign retailers,” said Ms. Nguyen Hoai An, Senior Manager of CBRE Vietnam. Vincom Retail aggressively expanded its Vinmart+ chain, which includes mini-supermarkets and convenience stores. It also opened two new brands in VinPro, an electronics outlet, and VinDS, a department store, in 2015. “Strong expansion was also reported from Aeon Group (Japan) and two other retailers from Thailand (BJC and Central Group) via partnership with local retailers,” Ms. An said.
On the supply side, the market saw one new project, one re-opening and one closure during the first quarter. The closure of Parkson’s in Hanoi reduced total retail space supply in the city by 4.6 per cent quarterly.
In a recent consumer survey conducted by CBRE of 1,000 consumers from 18 to 64 in Hanoi and Ho Chi Minh City, 25 per cent of respondents said they expect to shop less often in a store. 45-50 per cent indicated that they would shop online more often. It is surprising that an even greater proportion of consumers (69 per cent) aged from 55 to 64 believe they will use their smartphone/tablet more frequently to buy non-food items. Although the outlook of the brick-and-mortar format still remains upbeat, shopping center operators should be aware of the challenges posed by online retail. This is crucial for shopping center management and related areas such as marketing. It is suggested that retailers and landlords should take advantage of this trend and do more online selling and advertising via social media and their websites.
In addition, CBRE recommend landlords adapt their strategy to boost both e-commerce and offline business activities by leveraging “big data”, which can track levels of consumer engagement, implement Online to Offline (O2O) strategies, and create simple and useful applications for those who want to shop via their mobile devices.
Regarding the outlook for retail, rent for inline stores remains stable in the short term. “Shopping centers with weak performance will need to re-merchandise while adding more anchor tenants,” Ms. An said. “Turnover share schemes have become more popular.”
Besides, with future supply in 2015 and 2016 remaining high, shopping center proprietors will have to work very hard if they do not want to delay opening dates. “Local retailers will respond properly to their foreign peers,” she added.