The opportunity to “experiment” online sales during the pandemic has reduced the pressure for retailers to bet on expensive store locations in the city center
According to Cushman & Wakefield’s Q2 2022 report, there was no new retail supply during the quarter, and the total supply remained stable at about 1,1 million sqm. The vacancy rate was recorded at 5.1%, down 0.4% compared to the last quarter, which shows that the retail market is gradually rebounding after a difficult period. We predict that the unoccupied spaces will soon be filled since a number of tenants, especially in the fashion business, still need space for brick-and-mortar shops.
Tenants with strong finances after the Covid-19 surge in 2021 are still looking for suitable space to expand their footprint. Due to this, landlords are more confident and intend to increase or maintain their rent prices. Until Q2 2022, the market average asking rent reached US$49/m2/month, an increase of 4% compared to 2021.
Total retail and services revenue increased to about US$117 billion, growing 27.3% compared to the same period last year. A positive sign for the retail market is the number of international tourists this quarter increased nearly 7 times compared to last year, reaching 600,000 visitors, while the domestic market recorded 60.8 million visitors, according to the Vietnam National Administration of Tourism. With a fast-expanding middle class, it is pushing demand for travel and retail goods.
The quarter also saw expansion moves from major foreign retailers. On April, Uniqlo opened the door to its new 3,000 sqm store at Saigon Center. Another youth’s favorite international retailer-Muji also recently opened their 4th store at Cresent Mall in District 7, after the first store in HCMC and 2 more in Ha Noi. By the end of 2025, AEON plans to raise the number of MaxValu stores to 100 and expand its footprint from 6 malls to 16 in the future.
Besides movements from foreign investors, many local developers are developing their own ecosystem of F&B and consumer goods brands to provide services for residents and office workers in their developed projects. This model allows investors to actively occupy and operate retail space, including landed houses and commercial podiums, instead of waiting for potential tenants to move in.
It can be said that bygone are the days of brand origin reliance; instead, the fastest and most strategic will succeed. The opportunity to “experiment” with online sales coupled with changing consumer behaviors during the pandemic has allowed businesses to form their own omnichannel strategy.
The growth of social networks and online advertising services also eliminates pressure on businesses to find a city center location to promote their brands. Especially for retailers that already have a foothold in the market like Starbucks, these brands are concentrating on developing smaller stores to serve project residents in addition to operating bigger or flagship stores in a central location to strengthen the brand and improve customer experience. Vietnamese people are still willing to visit the store to personally experience the product, even though online shopping habits have been formed during the pandemic. The retail space will certainly continue to be significant in the omnichannel retail model.
By the end of this year, Cushman & Wakefield estimated that there is 98,000 sqm of upcoming stock of retail space in HCMC's East and West areas. As more and more foreign brands enter the Vietnamese market, the retail market is anticipated to become more vibrant.
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