High retail supply in HCMC to 2018

City's retail market to see large quantity of floor area by end of 2018, according to Colliers report.

A large supply pipeline of more than 600,000 sq m of gross floor area (GFA) from 19 projects is estimated to enter the Ho Chi Minh City market from now until the end of 2018, according to a report entitled “Ho Chi Minh City Market Insights - Retail Sector” released recently by Colliers International Vietnam.

Retail podiums serving shopping needs of residents in high-rise developments are on an upwards trend while large-scale shopping malls are being decentralized to suburban districts due to limited land availability in the city center. As a result of substantial supply, rents and occupancy rates will go down 2 per cent over the next two years.

Average net asking rents across all segments grew 11 per cent quarter-on-quarter in the first quarter of this year, reaching $52.4 per sq m per month, due to the high rate at RomeA, a newly-opened department store in District 3. While retail podiums remained at $75.8 per sq m per month, shopping malls and department stores increased their rents to $47.4 and $65.7 per sq m per month, respectively.

Average occupancy remained stable, at 93 per cent. Among the three segments, the occupancy rate of retail podiums improved 2 percentage points (ppts), to 93 per cent, while those of shopping malls and department stores were unchanged at 93 per cent and 97 per cent, respectively.

The first quarter welcomed the opening of the RomeA department store, located in the six-story podium at Leman Luxury Apartments, adding 12,000 sq m net leasable area (NLA) to existing retail stock. The retail mix is alluring, with approximately 35 per cent of tenants being well-known F&B brands such as Starbucks, King BBQ, HotPot, and Lotteria. Another special feature is Bon Grocer, the premium supermarket in the basement. This is the first department store of RomeA in Vietnam, with the prospect of more in the years to come.

The quarter also saw the grand opening of The Oxygen Mall, a three-story community mall of retail space at The Vista, a high-end residential development in District 2. Previously called The Vista Walk, the mall has been repositioned to make it more attractive to customers.

Vietnam’s middle and affluent consumers are forecast to grow 1.7-times in size by 2020 and disperse rapidly from key cities, Colliers noted in its report. It is believed that these types of buyers will drive spending on comfort and lifestyle products and lead a shift towards modern trade, making the country a very attractive market for foreign brands. With more international retailers such as H&M, 7-Eleven, Walmart, Ikea, and Forever 21 planning to penetrate into the local market, demand for retail properties and outlets in Ho Chi Minh City will remain strong.

by VET