Vietnam retail rents rise as flurry of global brands arrive
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Prime Vietnam retail rents are rising as a flurry of international retail brands move into Ho Chi Minh City.
The third quarter of 2016 saw major changes of supply market in HCMC, according to a research report by Colliers International.
In recent months, more than 100,000 sqm of retail space has been added in the city with the opening of the revamped Saigon Center anchored by Japanese department store Takashimaya and a new Aeon Mall opening in Binh Tan.
But average retail rental rates have slightly increased to US$126/sqm/month in the CBD and US$36/sqm/month in the suburbs.
Saigon Centre has been completed and occupied by 400 local and foreign brands, including concessions in Takashimaya. Aeon’s Binh Tan mall is the company’s second in Ho Chi Minh City, home to a large supermarket, restaurants, fashion shops, cinemas and a variety of retail stores.
Geert Jan ten Hoonte, retail advisor of Kusto Management Vietnam, said these two malls will bring an extra level into the market. “It will force other operators to rethink their offer to the consumers. It would be a good development if shopping centre developers start to think in location, functionality and market positioning for the malls they are planning,” he said.
Foreign brands
Vietnam’s retail industry’s latest quarter started with the departure of well-known F&B brand NYDC. The exit of the Singaporean dessert and coffee chain partly confirmed the struggle of international F&B brands face competing with domestic players.
Q3 also saw the debuts of many international fashion brands. The first, and largest, was Spanish fast-fashion brand Zara, which has taken up 2400 sqm of Vincom Dong Khoi with its first flagship store in Vietnam. The opening day brought Zara more than VND5 billion sales, reportedly the highest first-day sales of any new Zara store opening worldwide.
“But average retail rental rates have slightly increased to US$126/sqm/month in the CBD and US$36/sqm/month in the suburbs.”
Saigon Center and Takashimaya has enticed many international brands to HCMC such as Dsquared2, Fred Perry, and Ted Baker.
Other significant retailers to launch in the city during the quarter included faux Japanese, Chinese-headquartered retail chain Miniso, Naughty Cat and Innisfree.
With its fast-growing young population and emerging middle class, Vietnam’s retail market is expected to mature into a more convenient, modern retail environment in coming years. Vietnam’s admission to the WTO and the upcoming TPP trade agreement will draw a significant amount of FDI from international retailers in the future.
Online shopping
Meanwhile, online shopping is growing rapidly, with the Vietnam eCommerce and Information Technology Agency (VECITA) forecasting some 30 per cent of the population will be buying goods online by 2020, spending US$10 billion a year.
In 2015, online sales were $4.07 billion, and growing at 37 per cent on the previous year.
Despite being comparatively small by Asian standards, Vietnam’s eCommerce market is growing exponentially with more than 54 per cent of the population now connected online.
The government plans to boost eCommerce with a goal of 50 per cent of local enterprises setting up online stores and 80 per cent doing business through eCommerce platforms.
-Yen Hai Nguyen
Questions & Answers
Q.Which international F&B brand recently exited Vietnam's retail market, and what might this indicate?
Which international F&B brand recently exited Vietnam's retail market, and what might this indicate?
The well-known F&B brand NYDC, a Singaporean dessert and coffee chain, recently departed. This exit partly confirms the struggle international F&B brands face when competing with domestic players.
Q.How much retail space was added in Ho Chi Minh City recently, and what were the main new developments?
How much retail space was added in Ho Chi Minh City recently, and what were the main new developments?
More than 100,000 sqm of retail space was added in recent months. This was primarily due to the opening of the revamped Saigon Center, anchored by Takashimaya, and a new Aeon Mall in Binh Tan.
Q.What was Zara's initial sales performance like for its first flagship store in Vietnam?
What was Zara's initial sales performance like for its first flagship store in Vietnam?
Zara's opening day reportedly brought in over VND5 billion in sales. This was described as the highest first-day sales of any new Zara store opening worldwide.
Q.What are the government's plans to boost eCommerce in Vietnam?
What are the government's plans to boost eCommerce in Vietnam?
The government aims for 50 per cent of local enterprises to set up online stores and 80 per cent to conduct business through eCommerce platforms. They also forecast 30 per cent of the population will buy goods online by 2020.