Retail spaces are operating strongly at high capacity.
According to Savills' Q3 2024 market report, retail space in Ho Chi Minh City saw an increase in supply, with a total leasable area reaching 1.6 million m2, up 3% quarter-on-quarter and 5% year-on-year, following the opening of three new projects with a total leasable area of over 50,900 m2 in suburban areas. District 8 led the supply with two projects, Parc Mall and Co.opmart Pham The Hien, while Vincom Plaza 3/2 in District 10 reopened after renovations.
Furthermore, this type of business remains very strong, with occupancy rates maintained at a high of 94%, up 0.5 percentage points quarter-on-quarter and 4 percentage points year-on-year. Large tenants such as Mr. DIY, Uniqlo, and Muji are expanding into suburban areas due to affordable rents and high population density.
"The business is performing well with expanding brand chains and strong demand from key tenant groups," commented Ms. Cao Thi Thanh Huong, Senior Research Manager, Savills Ho Chi Minh City.
In terms of occupancy rates, key projects such as Hung Vuong Plaza, AEON Mall, and Van Hanh Mall consistently maintain 100% occupancy thanks to high foot traffic, diverse tenants, and effective management. The average ground floor rental price is VND 1.4 million/m2/month, increasing by 4% quarter-on-quarter and 6% year-on-year.
Many retail spaces are still operating at 100% capacity.
Consumption in this sector was also very positive, reaching 42,111 m2 of floor space. The F&B industry led with a 25% market share, followed by entertainment with 24% and fashion with 18%. This trend was also observed alongside the development of the retail sector in the city.
Specifically, in the first eight months of 2024, retail sales of goods and services in Ho Chi Minh City reached 765 trillion VND, a 10% increase year-on-year. According to estimates by the Ho Chi Minh City Department of Industry and Trade, retail sales of goods and services are projected to increase by 11% year-on-year in 2024. Consumer spending is expected to increase by 7.6%.
Assessing the future prospects of this type of property, Savills believes that market performance is expected to remain strong due to limited new supply combined with robust consumer demand. In Q4 2024, more than 27,600 m2 of floor space from three projects outside the city center will open, with an expected occupancy rate of at least 80%.
By 2027, the future supply will exceed 163,100 m2 from 12 projects; of which, areas outside the city center will account for 55% of the supply. To improve occupancy rates, some developers such as Cantavil Premier and Platinum Plaza are planning renovations and restructuring of their tenant mix by 2025.
The office market is facing supply challenges.
According to this report, the Ho Chi Minh City office market will not see any new Grade A projects entering the market. Total supply saw a modest 1% increase quarter-on-quarter, reaching 2.8 million square meters of net leasable area (NLA) from 392 projects, up 7% year-on-year. This growth was primarily driven by six new Grade B and C projects, adding 39,800 square meters of NLA.
Meanwhile, in the B-class segment, two new projects, Thaisquare The Merit (District 1) and CMC Tower B (District 7), accounted for 60% of the new supply. Four smaller C-class projects, each with an area of 3,000 to 5,000 m2 NLA, were mostly located outside the city center. Notably, Binh Chanh welcomed its first office building, LN Hub Building, providing over 3,300 m2 NLA.
Regarding the supply imbalance, Ms. Giang Huynh, Director of Research & S22M Department, Savills Ho Chi Minh City, commented: "Although future supply is expected to increase in the high-end segments, the annual absorption rate suggests the market will remain balanced."
Grade A office space is facing supply challenges.
In terms of occupancy, the office market declined by 1 percentage point quarter-on-quarter and year-on-year to 88%, primarily due to low occupancy rates at newly operational Grade B and C projects. Grade A projects in District 2 and District 7 performed well during the quarter, with occupancy rates increasing by 5 percentage points quarter-on-quarter and 23 percentage points year-on-year to 89%. These projects attracted tenants due to competitive rental rates.
Average rental rates remained stable quarter-on-quarter but increased 6% year-on-year to VND 812,000/m2/month, indicating a balance between supply and demand. Grade A properties outside the city center saw a 1% quarterly increase in rental rates, while Grade A properties in the city center experienced a 1% decrease.
According to Savills' survey of leasing transactions in Q3 2024, the majority (73%) of transactions were aimed at relocating to higher-quality buildings. The Finance, Banking, Insurance and Real Estate (FIRE) sector led with 39% of the transaction market share, followed by ICT with 31% and manufacturing with 13%. A large proportion (75%) of tenants were foreign companies, mainly from the US, South Korea and Japan, while domestic companies accounted for only 25%.
Assessing the prospects of this type of property, the research unit forecasts that new supply will be limited in the last quarter of 2024, with only 6,691 m2 of NLA from two Grade C projects. By 2027, an additional 196,412 m2 of NLA from 15 projects will be put into operation. Meanwhile, green certification is a growing concern for high-end office projects in Ho Chi Minh City, with 63% of upcoming Grade A and B supply focusing on meeting these standards.
Hotel schools are looking forward to the peak season.
According to Savills, in Q3 2024, the absence of new hotel projects and the closure of one 4-star hotel resulted in a 1% quarter-on-quarter decrease in supply. However, supply increased by 5% year-on-year to 16,443 rooms from 115 hotels due to the reopening of nine 3- and 4-star projects after renovations were completed, along with three new 4- and 5-star projects in the first nine months of the year.
International brands are thriving, with Hilton Saigon entering the market in Q1 2024, offering 228 five-star rooms, and subsequently, developer Mappletree rebranded InterContinental Asiana Saigon as JW Marriott Hotel & Suites Saigon during the same quarter.
In terms of growth potential, with the development of the tourism industry, the hotel sector has shown positive signs recently.
Specifically, in the first nine months of 2024, Ho Chi Minh City's tourism sector significantly improved year-on-year, with international visitors reaching over 4 million (a 12% year-on-year increase) and domestic visitors reaching nearly 27.4 million (a 1% year-on-year increase). This boosted hotel performance, with average room rates increasing by 2% year-on-year to VND 2 million/room/night and occupancy remaining stable at 62% year-on-year, despite a 5% year-on-year increase in supply.
Many international brands have entered the Ho Chi Minh City hotel market and are experiencing good growth.
Specifically in Q3 2024, despite being the low season, the market still recorded a 1 percentage point increase quarter-on-quarter and a 3 percentage point increase year-on-year, reaching 61%, thanks to a 16% increase in domestic tourists and the stability of international visitor numbers. Average room rates increased by 4% quarter-on-quarter and 3% year-on-year as all segments saw price increases in preparation for the peak season starting in September.
"Despite being the low season, the performance in Q3 2024 improved compared to the previous quarter. With promising prospects for the peak season in the next quarter, Ho Chi Minh City is on track to achieve its visitor target for 2024," said Neil MacGregor, General Director of Savills Vietnam.
However, looking at the development prospects, Savills believes that future supply in Ho Chi Minh City is quite scarce, with only three new projects expected to enter the market by 2027. All projects are located in District 1 and are expected to be managed by international brands. In Q4 2024, the Indigo Saigon The City hotel is expected to be the only new project to open, with 150 five-star rooms.
Source: https://www.congluan.vn/tp-hcm-mat-bang-ban-le-van-phong-ghi-nhan-tin-hieu-tich-cuc-trong-quy-iii-2024-post315192.html
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