Commercial Leasing “Resurgence” in North and South Vietnam

In the first quarter of 2024, the commercial leasing market in Vietnam witnessed a resurgence in both the northern and southern regions. With a focus on retail spaces, this article explores the increasing demand for rental properties in these areas.

Increasing Demand in Ho Chi Minh City

According to a report by JLL, the retail market in Ho Chi Minh City recorded a net absorption of approximately 1,900 square meters in the first quarter of 2024. The growth was primarily driven by the demand in the non-central areas. While the central area remained unchanged in terms of occupancy rate, the demand in the non-central areas continued to grow. Notable lease transactions in these areas include Galaxy Cinema, Manwah, Aim Box, and Carter & Gymboree. These new stores indicate the stable expansion of entertainment, F&B, and retail chains catering to children in the non-central areas.

In terms of supply, there were no major new shopping centers completed in the first quarter of 2024. Vincom Mega Mall Grand Park is expected to open in the second quarter of 2024. Consequently, the total supply remains at 84,109 square meters for the central area and 538,819 square meters for the non-central area.

(Image source: JLL)

According to JLL, the vacancy rate in the central area of Ho Chi Minh City remained low at 1.6% in the first quarter of 2024, reflecting the potential and sustainable recovery of key shopping centers in this area. On the other hand, the non-central area experienced an improvement in the vacancy rate, decreasing from 5.4% in the previous quarter to 5% in the first quarter of 2024. This positive trend is a result of the strong demand for existing spaces and the sustainable growth of tenants seeking to establish or expand their presence in the non-central area.

In terms of rental prices, both the central and non-central areas of Ho Chi Minh City remained stable in the first quarter of 2024. The net rental price in the central area remained unchanged at $83 per square meter per month, highlighting the market’s ability to maintain its premium position and attract high-end retailers. Similarly, the net rental price in the non-central area also remained stable at $35.4 per square meter per month, indicating steady demand for retail spaces in this area. Overall, the average net rental price for the entire market reached $41.9 per square meter per month, a slight increase of 0.01% from the previous quarter, emphasizing the market’s recovery amidst the current economic conditions.

Looking ahead to 2024, the retail market in Ho Chi Minh City is expected to grow, with the completion and launch of Vincom Mega Mall Grand Park, which will add approximately 653,000 square meters of retail space to the city’s total supply. While the central area is projected to maintain its current supply, the non-central area is expected to witness significant expansion, reaching approximately 569,000 square meters, largely due to the addition of new shopping centers. JLL anticipates the retail market in Ho Chi Minh City to maintain its recovery throughout the year, with stable rental prices. By the end of the year, the net rental price is forecasted to be around $84 per square meter per month for the central area and approximately $38 per square meter per month for the non-central area, thanks to the introduction of new supply. The demand from large retailers, particularly in the F&B, fashion, and sports sectors, is projected to increase, as these retailers continue to establish their presence in new projects, contributing to the market’s promising prospects.

Significant Decrease in Vacancy Rates in Hanoi

JLL’s report also revealed a significant decrease in vacancy rates in both the central and non-central areas of Hanoi. The net absorption of key shopping centers in the central area amounted to approximately 500 square meters in the first quarter of 2024. Notable lease transactions in this area included Botejyu and Dzosushi at Vincom Center Metropolis. In the non-central area, the net absorption increased by around 29,000 square meters, with new leases recorded in various shopping centers such as Kubo, Grandbois, Don Chicken, and Cheong Hak Gol. These new stores and expansions have contributed to the vibrant leasing activity in the quarter.

Lotte Mall West Lake Hanoi exhibited strong net absorption, accounting for over 80% of the total net absorption in the non-central area. Most of these transactions had completed their interior fit-out processes in the previous quarter and officially opened in the first quarter of 2024. This robust net absorption demonstrates the lively leasing activity and high demand for quality retail spaces in the non-central area. The success of Lotte Mall West Lake Hanoi amidst economic difficulties showcases its attractiveness to tenants and customers, solidifying its position as a leading retail destination in the city.

(Image source: Business Today)

In terms of supply, there were no new retail projects completed in Hanoi in the first quarter of 2024, maintaining the total retail supply at 671,219 square meters. The central area retained a supply of 54,962 square meters, while the non-central area remained at 616,257 square meters.

In the first quarter of 2024, the vacancy rates in both the central and non-central areas of Hanoi decreased. The vacancy rate in the central area decreased to 3.9%, a 0.9% decrease from the previous quarter, thanks to the stable demand for key shopping centers and limited new supply. Meanwhile, the vacancy rate in the non-central area experienced a more significant decline, decreasing from 11.3% to 6.6%, primarily due to the official opening of major tenants in the newly launched Lotte Mall West Lake.

According to JLL, the net rental prices in both the central and non-central areas of Hanoi remained relatively stable in the first quarter of 2024, at $65.3 per square meter per month and $33.7 per square meter per month, respectively. This represents a 2.4% year-on-year increase for the central area and a 7% year-on-year increase for the non-central area, indicating the market’s recovery amidst the current economic conditions.

Looking ahead to the end of 2024, the retail market in Hanoi is expected to witness different supply trends between the submarkets. The central area is projected to maintain a stable supply, reflecting its established retail landscape and limited space for new projects. In contrast, the non-central area is poised for further growth, with an expected supply of approximately 635,000 square meters. The expansion will be mainly driven by the anticipated completion of The Heritage Mall in the West Lake area, providing new premium retail spaces to the market.

The retail market in Hanoi is expected to continue improving, although the extent of improvement may vary across different submarkets. In the central area, the net rental prices are expected to remain stable or slightly increase compared to the previous year, reflecting the established reputation of the area and stable demand for high-end retail spaces. On the other hand, the non-central area is forecasted to witness significant growth in net rental prices, especially with the introduction of new high-quality supply in the West Lake area starting from 2024. While this modern retail expansion may push rental prices higher in the area, increased competition within the region may hinder rental growth. Therefore, strong leasing and marketing efforts are expected to correspondingly increase.

In conclusion, the commercial leasing markets in both northern and southern Vietnam are experiencing a resurgence. The increasing demand for retail spaces in Ho Chi Minh City and the significant decrease in vacancy rates in Hanoi are positive signs for the market’s recovery and growth potential. With these developments, the retail market in Vietnam is poised for a promising future.

References: Business Today