Disillusionment with investing in ground-floor shophouses.

A shophouse in an apartment building in Go Vap district has been left vacant for a long time.

Once highly sought after and considered a "golden goose" for investors, ground-floor shophouses in many apartment buildings are now facing sluggish demand, low rental rates, or being put up for sale. This situation has left many shophouse owners in dire straits, and investors with their capital tied up, as the current low rental rates are negligible compared to the initial investment of billions to tens of billions of dong. This is happening in Ho Chi Minh City, a densely populated city with the highest consumer spending in the country.

For over three months, Mr. Dung, the owner of a shophouse in Go Vap District, Ho Chi Minh City, has been trying to sell his 50m2 shophouse at a loss of over 500 million VND, but no one has inquired yet. Mr. Dung bought this shophouse in 2019 for nearly 3.8 billion VND and initially rented it out for 15 million VND per month. However, due to poor business, the tenant vacated the property after six months. Afterward, Mr. Dung put up a "for rent" sign again, but with few inquiries, he proactively reduced the rent to 13 million VND per month. Now, after several attempts at renting, the price has been further reduced to 10 million VND per month, but the space remains vacant.

"Every month I still have to pay over 20 million VND in interest and principal on my 2 billion VND loan. The rental income is meager, and the pressure of interest payments is overwhelming, so I had to sell the shophouse at a loss, but I've been advertising it for over 3 months and still haven't found a buyer," Mr. Dung said.

Sharing a similar experience, Mr. Hien, a real estate investor, said: "In 2018, I invested in a shophouse in a project in the former District 2 (now Thu Duc City) for over 5 billion VND. Located on a main road with heavy traffic, I was convinced that over time my property would appreciate in value or be rented out at a high price. As planned, I initially rented it out to a tenant who opened a coffee shop for 30 million VND per month. However, since the end of 2020, due to business difficulties, my shophouse, along with several neighboring properties in the same area, has been closed and unrented."

“When the pandemic was over, I thought the market would quickly stabilize, but two years have passed and my apartment is still vacant. Recently, a potential tenant offered 15 million VND per month to rent it for a mini-supermarket, but I haven't agreed yet. I plan to sell it because it's not a profitable investment,” Mr. Hien said.

According to many real estate experts, e-commerce has grown significantly in recent times. Many companies now only need warehouses, not physical stores, and these warehouses are now smart service warehouses, managed and operated online, which is both cheaper and safer. Renting shophouses for warehousing is both expensive and insecure.

According to experts, shophouses were truly valuable when they first appeared in Vietnam in the 2000s. In the central districts of Ho Chi Minh City, a series of shophouses were once "golden geese" attracting investors. Because of their success, real estate businesses continuously released new supply onto the market, leading to oversupply.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), believes that a shophouse project must encompass many factors, especially demographics, detailed calculations of user behavior, and the number of people passing through to ensure that business and shopping activities can generate daily cash flow for the project. Only then can a shophouse be profitable. In addition, it is necessary to carefully study the significant changes in people's shopping and entertainment habits. Currently, consumers are using online shopping more frequently, and migration to satellite urban areas makes concentrated trading less effective than before, thus significantly reducing the value of shophouses.

Sharing the same view, experts from CBRE Vietnam believe that although shophouses are considered a lucrative segment by professionals, investing in them for retail purposes can easily lead to disappointment if the potential demand from within the urban area and surrounding residents is not carefully considered. In the inevitable development trend of the current real estate market, every apartment complex project must allocate space for commercial areas. However, depending on the location, each project will have different needs. Therefore, the development and improvement of shophouses will depend on the location and scale of the project.

In a recent market report by JLL Vietnam, the company also advised investors considering this shophouse segment that if they do not have readily available cash, they should think twice before investing, as it is very easy to "collapse" the market. To retain current tenants, shophouse owners have to reduce rents. Meanwhile, for properties currently being offered for rent, landlords are facing demands to reduce current asking rents by 20-40%. Contract terms remain at 3-5 years; however, tenants are proposing not to increase rents throughout the lease term…

Source: https://baotainguyenmoitruong.vn/vo-mong-dau-tu-shophouse-khoi-de-362561.html