"Wave" of businesses returning leased premises
During this difficult period, the real estate market nationwide, and particularly in the southern provinces, faced numerous challenges. Economic fluctuations significantly impacted a wide range of businesses and trades in Ho Chi Minh City, leading to a wave of tenants returning leased premises, apartments, and offices, causing this segment to struggle.
According to a report by batdongsan.com, in the first quarter of 2023, the demand for renting street-front properties in Ho Chi Minh City showed a 40% decrease compared to the same period last year. Preliminary statistics show a 45-50% decrease in Districts 7, 3, and Phu Nhuan. The rental market is considered to have experienced a sharp decline after being heavily impacted by the Covid-19 pandemic, with shopping malls, rental spaces, and shophouses all facing liquidation.
Many commercial spaces for rent in the downtown area of Ho Chi Minh City have signs advertising they are looking for tenants.
Currently, rental properties in southern provinces such as Ho Chi Minh City and Binh Duong are experiencing low demand. Along Vo Thi Sau Street (District 1, Ho Chi Minh City), many houses and businesses are plastered with numerous phone numbers and addresses advertising rental properties, cheap rentals, and direct owner listings.
Several streets, such as Tu Xuong, Nam Ky Khoi Nghia, Le Quy Don, and Nguyen Dinh Chieu (District 3, Ho Chi Minh City), are also completely covered with banners by landlords, but still have no tenants or businesses operating.
Speaking to a reporter, Mr. Pham Nhat Phuc (a resident of District 3 and the landlord) said: "Since the Covid-19 pandemic, many business owners have started returning their leased premises. I have over 200 square meters of floor space for rent, but for nearly three months now, no one has shown any interest. It's not because the rent is expensive, but because almost everyone in my entire area has returned their leased premises."
Ms. Huong, residing in Go Vap District, Ho Chi Minh City, also shared: “I own a house on Hoang Sa Street, District 1, with an area of over 60 square meters and 3 floors. Previously, I rented it out for over 30 million VND per month for both business and living. However, the tenant left because the business wasn't doing well. It took me more than two months to find a new tenant, but they wanted to rent it for living purposes, so I had to lower the price to balance things out.”
Another case is Mr. Tran Thanh Tung, residing in Binh Thanh District, who owns a rental property of over 100 square meters on D5 Street, Binh Thanh District. However, by the beginning of this year, the property had been returned by the previous tenant. Despite displaying a "for rent" sign for some time, he has yet to find a new tenant.
The return of leased properties has a significant impact on the rental real estate market.
According to our reporter's observations, although the wave of businesses returning leased premises continues in central areas of Ho Chi Minh City, rental prices have remained relatively stable. A space of over 100m2 on Le Loi Street, District 1, is being offered for rent at 50 million VND/month (over 2,000 USD/month). A 150m2 space on Hai Ba Trung Street, District 1, is being offered for rent at 40 million VND/month (nearly 2,000 USD/month).
Many of the most beautiful streets in the city center, such as Pasteur and Nguyen Hue, still have numerous vacant commercial spaces due to a lack of tenants. Despite this, rental prices remain sky-high, ranging from $3,500 to $20,000 per month.
Having opened a food business in District 3 but unable to survive, Ms. Le Thi Hoa, a resident of Binh Thuan province, said: “Since 2019, I opened a food business on Le Quy Don Street, District 3, with a rent of over 30 million VND/month. However, since the pandemic, the landlord has not reduced the rent, and business has been slow, so I was forced to give up the premises and stop doing business to find another job.”
The key to turning around the rental property market.
In reality, the low occupancy rate of commercial spaces is due to many factors, the most important of which is the rental price. The cost of renting a space is calculated based on the land prices in the area where the space is located.
Recently, the real estate market has experienced rapid growth, leading to soaring house prices and correspondingly higher rental costs. Meanwhile, many property buyers have used bank loans with high interest rates. When the market or economy slows down, service businesses are affected by a lack of customers, leading to a growing number of businesses having to vacate their premises.
Experts still have high expectations and value the rental segment, believing it will continue to generate revenue for the market in 2024.
Speaking to Nguoi Dua Tin , Mr. Nguyen Hong Hai, Chairman of VNO Group, commented: “Currently, looking at the overall situation, the rental market is facing many difficulties, with many business owners choosing to close their stores and return the premises. Now that the real estate market is affected and many industries are experiencing declining revenue, the rental market segment is facing even greater challenges.”
According to Mr. Hai, besides being affected by the economy, tenants returning leased premises face many other reasons, including unfavorable business conditions, shifts in business direction, online business, virtual office rentals, etc. “Instead of expanding their businesses as before, investors are gradually consolidating, cutting back on unprofitable or decliningly profitable business locations to reduce costs and concentrate investment in a single location. This is inevitable in business,” Mr. Hai explained.
The office buildings currently under construction in Ho Chi Minh City promise to create a large supply for this segment in 2024.
Although the office, shophouse, and rental housing markets faced many difficulties in 2023, data shows that from the third quarter of 2023, these markets remained vibrant and attracted the attention of investors.
According to Ms. Pham Ngoc Thien Thanh, Deputy Director of Research and Consulting at CBRE, the Ho Chi Minh City office market became more vibrant in Q3 2023 with the opening of two new office buildings in the Thu Thiem area of Thu Duc City, The Mett and The Hallmark, with a total leasable area of approximately 85,000 square meters.
Thanks to this new supply, the total office space in Ho Chi Minh City has reached approximately 1.6 million square meters of leasable area. The majority of large leasing transactions this quarter took place in new, high-quality buildings completed from 2020 onwards.
In the retail real estate leasing market of Ho Chi Minh City in Q3 2023, rental prices for ground floor space in the city center reached over 200 - 350 USD/m2/month.
The supply of rental properties is increasing.
Mr. Nguyen Hong Hai, Chairman of VNO Group, stated: “Currently, the most important ‘key’ is to make rental prices reasonable. Therefore, to retain tenants, it is necessary to lower rental prices to match the real value of the property. However, landlords need to balance the price based on the location and financial capacity of each property. Accepting lower rent than before will retain long-term tenants, while also reducing the risk of vacant premises and avoiding periods without income when looking for new tenants. In addition, landlords should create favorable conditions for tenants regarding payment schedules to ensure flexible cash flow for tenants.”
According to Mr. Hai, landlords and shopping mall owners have invested a significant amount of money in the premises themselves, so they need a large number of customers who are interested in renting. While 2024 will certainly present challenges, if the interests of landlords and tenants can be balanced, and all parties work together and adjust prices in each area and location, then opportunities in the rental market will remain abundant.
According to real estate expert Pham Thu Hoa, "In 2023, despite market difficulties and many tenants and investors returning leased premises, they still had different business strategies. In 2024, Ho Chi Minh City will implement many programs to stimulate tourism and shopping services to attract tourists and strongly develop the city's special mechanisms. This is also an opportunity for businesses to return, and the office and retail space leasing sectors will also increase."
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