Many new brands face challenges when finding retail space.

The retail industry is recovering strongly.

Vietnam's retail industry, one of the most dynamic economic sectors, has grown continuously over the past years and is recovering strongly after the pandemic. According to the General Statistics Office, in the first half of 2024, total retail sales of goods and consumer service revenue reached VND3,098.7 trillion, up 8.6% over the same period last year.

Vietnam is undergoing rapid urbanization with a large working-age population. Along with that, the purchasing power of the domestic market, average income and the number of rich people in Vietnam have also increased significantly in recent years. Reports by the global wealth and migration research company New World Wealth (South Africa) and the investment settlement and citizenship company Henley & Partners (Switzerland) also show that the number of millionaires in Vietnam (people with a net worth of 1 million USD or more) has increased by 98% in the period 2013-2023, the fastest in the world .

Along with that, Vietnam tourism has recorded good resilience in the post-pandemic period, contributing to the growth of the retail industry. According to the National Tourism Administration, Vietnam welcomed more than 1.2 million international visitors last June. The cumulative number in the first 6 months reached more than 8.8 million, an increase of nearly 60% over the same period last year. These factors have promoted the need for international brands to be present and expand in the Vietnamese market.

Many brands are entering Vietnam thanks to market expectations and potential.

Responding to market demand, retail real estate supply generally maintained growth momentum. By the second quarter of 2024, supply in Ho Chi Minh City reached nearly 1.5 million square meters of leasable area, up 2% quarter-on-quarter. It is expected that by 2026, the market will have more than 188,000 square meters of floor space from 12 projects. In Hanoi, total supply decreased by 1% quarter-on-quarter but still increased by 4% year-on-year, mainly due to the closure of Robin Department Store. At the same time, over the past 5 years, supply has achieved an average growth rate of 3%/year.

According to Ms. Hoang Nguyet Minh, Senior Director, Commercial Leasing, Savills Hanoi, the demand for leasing in shopping malls is at a high level. In the last quarter, the Hanoi market recorded many exciting transactions in shopping malls, especially in the F&B industry. Typically, the 4P's brand doubled the store area at Lotte Center Hanoi.

Gye Shige, a Japanese barbecue chain, opened its first location in Hanoi in the Lancaster Luminaire project after being well received in Ho Chi Minh City. In Ho Chi Minh City, the new Vincom Mega Mall Grand Park project has a good absorption rate, accounting for 65% of the total market consumption.

Hoang Nguyet Minh, Senior Director, Commercial Leasing, Savills Hanoi

New brands compete for rental space

However, Ms. Minh analyzed, not all shopping malls are successful in attracting and retaining tenants. On the contrary, new brands also face many challenges when looking for rental space here.

Savills’ Q2 report shows that in the Hanoi market, occupancy rates decreased by 3 percentage points compared to the previous quarter and 2 percentage points compared to the same period last year, reaching 84%. Meanwhile, retail podiums recorded a 7% year-on-year increase, but shopping mall occupancy rates decreased by 4 percentage points. Department stores, in particular, maintained stable occupancy levels throughout the year.

The leasable area decreased by 49,800 m2, of which the shopping center had a significant decrease of 54,000 m2. The retail podium had the largest additional leasable area with 13,900 m2.

Ms. Minh said: "The occupancy rate at shopping malls has decreased despite high demand, because shopping malls are in the process of changing brands. Along with that, many shopping malls are deployed as the base of apartment buildings. This model is not as attractive to retailers as large shopping malls, especially for brands in the fashion, cosmetics, and restaurant industries."

Many new shopping malls have appeared, causing the overall capacity to decrease.

The retail podium type mainly attracts gym and coffee brands. However, the space here often has many columns or elevators serving apartments, making them less attractive than large shopping centers such as Lotte Mall, Vincom Retail, Aeon Mall. These places are carefully invested in tenant distribution and communication, creating a more attractive shopping and entertainment environment.

According to Savills experts, rising rents are also a challenge for brands, especially new ones, to find space to rent. In Hanoi, gross ground floor rents increased by 2% quarter-on-quarter and 13% year-on-year. Rents for shopping malls in the central area increased from VND3.1 million/m2/month to VND3.4 million/m2/month, while rents for department stores reached VND2 million/m2/month.

To solve the problem of vacant space but new brands still have difficulty finding suitable locations, Ms. Minh recommends: "Investors need to have a systematic tenant portfolio strategy, ensuring a balance between consumer shopping and entertainment groups, meeting market needs to attract tenants. At the same time, these businesses also need to carefully research the demographics of each area to ensure optimal leasing options. From another perspective, the management and operation unit also needs to focus on management services, marketing and advertising programs, entertainment activities to stimulate demand, policies, price support programs... to ensure the number of customers coming to the shopping center".

For example, at Vincom Mega Mall Grand Park, after 1 month of operation, this project has had the participation of nearly 100 famous brands, diverse product lines and welcomed tens of thousands of visitors to visit and shop every day.

Source: https://www.congluan.vn/nhieu-thuong-hieu-moi-gap-thach-thuc-khi-tim-mat-bang-ban-le-tai-thi-truong-viet-nam-post309810.html