Retail sector growth momentum remains robust

After nearly one year of construction, Thien Son Company last week cut the ribbon to open a shopping mall in the new urban town of Phu My Hung in HCM City’s District 7, offering tenants more choice and providing a shopping destination for residents in and around the town.

Vo Thi Phuong Mai, director of Thien Son Company, told the Daily that the company has invested some $15 million in the Thien Son Plaza on Nguyen Luong Bang and Nguyen Van Linh roads. The shopping mall has four levels and about 20,000 square meters of retail space.

Mai said the company was looking at middle-income people as target customers at the newly opened shopping centre, following the first in Hanoi. Around 80 percent of the plaza’s space has been occupied by retailers.

Talking about the company’s business expansion plan, she said Thien Son is mulling another retail building in the southern province of Binh Duong.

Promising sector

For many market observers, retail is seen as the most attractive in comparison with other real estate market segments. Fast urban development leading to changes in the habit of shopping among local consumers is offering a lot of business opportunities for local and international retailers. In big cities like HCM City and Hanoi, the number of shopping malls, department stores and supermarkets has increased significantly in recent years in tandem with the modern shopping trend.

A recent market beat report by property service provider Cushman & Wakefield recorded a good performance of most retail centres in HCM City as average occupancy is over 90 percent in the last quarter this year. The market has seen the trend moving from the traditional retail format to the modern format, representing some 20 percent of demand in the city.

There is some 545,000 square meters of retail space in the city, including at supermarkets, retail podiums, department stores and shopping centres, according to Cushman & Wakefield. The central business district area is most sought after by many retailers.

The market observer says retail centres in the central business districts have impressive occupancy rates and that department stores have higher occupation than shopping centres. Meanwhile, the average occupancy of all retail centres outside of the central business districts is lower.

Speaking at the market update on Vietnam retail and consumer trends held by EuroCham in the city last week, Richard Leech, executive director of CB Richard Ellis Vietnam (CBRE), said the market saw vacancy down and central business district rents up 7.1 percent to an overall average of nearly $133 per square metre per month. Meanwhile, the non-central business districts continued to see rental rates softening to an average of $39 per square metre per month as retailers continued to prefer the city centre. The food and beverage sector continued dominating the expansion in the market.

Like other experts, Leech highlighted the market trend, saying urban life is driving the change towards an international style market economy as the market is witnessing modern trade centres are gradually designed with a combination between traditional market and modern trade centre, making it a venue for not only shopping but also entertainment.

Leech projected new brands are keen to join the market but are looking for prime locations with attractive rents.

Strong demand is expected to continue in the central business districts until more retail space from Bitexco Financial Tower, Times Square and M&C Tower comes online in the next two years. Meanwhile, districts 2 and 7 will get new retail components within residential developments.

It is forecast that the HCM City market will have an extra 245,000 square meters of retail space by 2011, most of it located outside the central business district areas. However, over 900,000 square meters of new retail space will enter the market in 2012 and 2013, according to Cushman & Wakefield.

Vietnam’s retail sector will continue growing over the next few years, says the company. Rents in the central business district area are seen rising further until the end of 2011, and occupancy will remain high. However, retail centres outside the central business district will offer lower rents to stay competitive. – Saigon Times

Tags: vietnam retail industry, Vietnam retail market