Products unsalable, retail premises left idle

A lot of retail premises on advantageous positions in the central areas of big cities, which were thought to be very difficult to lease, have been left idle. Since the demand is too weak, retailers had to give business premises back to owners and left.

One of the most noteworthy things in the Q3 market report released by CBRE is the low occupancy rate of retail premises on some “golden routes” of HCM City – the commercial hub of Vietnam.

Premises do not lay golden eggs any more

Hung, a broker, said that he has been seeking clients, who want to buy the retail premises with large area on Hai Ba Trung Street, where there was the showroom of a big electronics company, for the last two months.

Hung said it is very difficult to find tenants these days, even though the owner accepts to offer some preferences, because the retail premises rents have become sky high, while the purchasing power is weak.

The owner of a street-front retail premises on Cong Hoa Road said that in 2010, she got 2000 dollars a month in rents. However, the tenant, who ran an interior decoration service shop, has decided to give back the premises, because the revenue from services is not high enough to cover expenses.

It is even more difficult to find tenants for the premises far from the central area of HCM City, such as the ones on Cach Mang Thang Tam or Le Van Sy in Tan Binh District. Shops’ owners have shut down shops and left because they could not afford the high rents

The Ben Thanh market is always considered the “golden land” of the city. In previous years, the kiosk rent always stayed firmly at 4500 dollars per month. However, the rent has dropped dramatically to 850 dollars, even though the tourism season and the Tet sale season are nearing.

NT Thu, a merchant at the market, said that she has leased a kiosk in the area No 2 of the market at 17 million dong per month, because she knows the demand is weak. Especially, the kiosks on less advantageous positions can be leased at just 4-5 million dong a month.

What to do? Shutting down business or re-leasing premises

The dramatic demand decreases have forced a lot of retailers to shut down business and give the retail premises back before the due time. “C”, a well known fashion brand, for example, has to cut down the number of showrooms from 80 to 45, while “P” brand has cut down 20 shops.

Ninh, the owner of a retail chain specializing in selling wooden furniture, said that he has decided to remove the shop on Nguyen Thai Binh road in Tan Binh district, and has cancelled the plan to open a branch on February 3 Road, accepting to lose the deposit money. He said that he has no other choice than shutting down some shops, since the business performance has been worse than initially expected.

The businessman said that the retail premises rent increase is not the main problem. The biggest problems for retailers and producers are the weak demand, which makes products unsalable.

The weak demand has forced many merchants to cancel their business plans. Meanwhile, those, who have signed contracts on long term business premises leasing, have to re-lease the premises or parts of premises, because they anticipate losses in such difficult conditions.

According to real estate consultancy firms, from 2012, HCM City would have 1.2 million square meter of retail premises more, which will be mostly in districts 1, 2 and 7, where there are more shopping malls taking shape which provide 70 percent of the total retail premises area of the whole HCM City.

Source: SGTT

Tags: Vietnam retail, vietnam retail industry, Vietnam retail market, Vietnam super markets