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Quiet Q1 for Hanoi's retail real estate market

Released at: 11:11, 04/04/2018

Quiet Q1 for Hanoi's retail real estate market

Photo: Ngoc Lan

Latest quarterly report from CBRE Vietnam finds little change in first quarter of 2018.

by Ngoc Lan

Hanoi’s retail market began 2018 with a quiet first quarter, according to the latest quarterly report from CBRE Vietnam.

Total supply in the market remained at 790,000 sq m, unchanged since the second quarter of 2017. By location, Mid-town and the West accounted for 54 per cent of all modern retail supply while Other Non-CBD areas provided nearly 40 per cent of retail space.

In terms of market performance, beside the stability of the CBD due to limited supply, other areas witnessed an increase in vacancy rates, especially in Other Non-CBD locations, with a 0.7 per cent increase quarter-on-quarter.

To deal with worsening occupancy rates and pressure from upcoming supply, especially with two new projects to be launched in the second quarter, landlords in the West and Other Non-CBD locations have begun offering more flexible leasing strategies in order to attract tenants. Average market rental rates dropped slightly in the first quarter. by 0.9 per cent quarter-on-quarter, though rose 0.2 per cent year-on-year.

In terms of tenants, Convenience Stores and Supermarkets continued their rising trend, with continued expansion by existing players such as Circle K and Vinmart+.

The outlook for this category remained bright, with consumer trends shifting further towards convenience as Vietnam’s retail market transforms from traditional to modern retail.

Moreover, new residential developments have formed new residential clusters, creating demand and space for Convenience Stores and Supermarkets. This type of retail, if and when it is included in a residential project, can also act as a value added service and facility, which in turn increases its appeal to buyers.

Acknowledging this potential, certain local developers have begun to venture into the sector through either cooperation with international brands or self-operation. Examples include the joint venture of Son Kim Land and South Korean retailer GS Retail, the launch of Qmart and Qmart+ by the T&T Group, and the FLC Group’s F-mart.

Ms. Nguyen Hoai An, Director of Research and Consulting Services at CBRE Vietnam said that developers of shopping malls must continually innovate to attract tenants and shoppers.

Meanwhile, in Ho Chi Minh City, total supply as at the end of the first quarter was 880,840 sq m net leasable area (NLA).

Non-CBD areas welcomed one new supply of 60,000 sq m NLA from Van Hanh Mall, while there was no new supply in the CBD. Van Hanh Mall was 90 per cent occupied when it opened, by more than 200 international and local brands.

The vacancy rate in the CBD area was virtually zero in the quarter thanks to limited supply. The first quarter recorded the highest occupancy rate ever seen in Ho Chi Minh City. In the Non-CBD area, the vacancy rate was unchanged from the previous quarter, at 6.9 per cent, and down 6.1 percentage points year-on-year.

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