Retail building oversupply reaches alarming level in HCM City
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A Cushman & Wakefield’s report shows that the retail rent in the second quarter fell by 5 percent compared with the same period last year. Meanwhile, the supply is forecast to soar to 1.5 million square meters by 2020, 200 percent higher than today.
According to Savills Vietnam, the total retail premises area which has been put into operation by August, had reached 940,000 square meters. It is expected that the market would have an additional 200,000 square meters from 10 projects.
In the eastern part of HCM City, which is considered the ‘hottest spot’, at least 300,000 square meters of trading floor – a basement of apartment blocks – would become operational in 2015-2018.
The retail supply boom in the eastern part of the city is attributed to the city’s policy on increasing infrastructure investment in the area. However, the existing shopping malls in the area remain poorly patronized.
Viet An Hoa’s CEO Tran Khanh Quang warned that 300,000 square meters of retail premises was too high and may lead to an oversupply.
The retail premises area in the southern part of HCM City has also been increasing. According to Savills Vietnam, there are about 151,000 square meters of modern retail premises under exploitation, including 60,000 square meters, or 40 percent, in Phu My Hung new urban area.
It is expected that 80,000 more square meters of retail premises will hit the market by 2016.
SC Vivo City (41,000 square meters), Crescent Mall (45,000) and Parkson Paragon (12,800) are the three largest shopping malls in the southern area of the city. But they are not crowded on week days.
“The retail premises are in oversupply,” said Nguyen Van Duc, Deputy Director of Dat Lanh Real Estate.
“Even the shopping malls in advantageous areas are deserted these days,”
“Even the shopping malls in advantageous areas are deserted these days,” he said, adding that investors should not ‘be overly excited with retail building projects’.
He went on to say that it was a ‘blunder’ for project developers to set up shopping areas in the basement of buildings.
The shopping malls at apartment buildings, together with separate shopping malls above ground, will lead to an oversupply of retail premises.
However, Le Thi Kim Hoa from Cushman & Wakefield is optimistic about the market, saying that the supply would force rental prices of retail premises down, which will benefit customers.
Savills Vietnam’s Nguyen Thi Van Khanh noted that, compared with Bangkok, which has 8 million square meters of retail premises, and Singapore with 4 million, the retail premises total area of less than 1 million was ‘modest’.
Questions & Answers
Q.What is the expected total retail premises area in HCM City by 2020?
What is the expected total retail premises area in HCM City by 2020?
The supply is forecast to soar to 1.5 million square meters by 2020. This represents a 200 percent increase compared to the current supply level in the city.
Q.Which specific areas of HCM City are experiencing a retail supply boom?
Which specific areas of HCM City are experiencing a retail supply boom?
The eastern and southern parts of HCM City are seeing a retail supply boom. The eastern part is expected to add 300,000 square meters, while the southern part will gain 80,000 more square meters by 2016.
Q.How do some experts view the development of shopping areas in the basements of apartment buildings?
How do some experts view the development of shopping areas in the basements of apartment buildings?
Nguyen Van Duc believes that setting up shopping areas in building basements is a 'blunder'. He suggests this, along with separate malls, will contribute to an oversupply of retail premises.
Q.What is Cushman & Wakefield's outlook on the future of the retail market in HCM City?
What is Cushman & Wakefield's outlook on the future of the retail market in HCM City?
Le Thi Kim Hoa from Cushman & Wakefield is optimistic, anticipating that the increased supply will drive down rental prices. This reduction in rent is expected to benefit customers.