Vietnam – a promising land for global retailers

According to the market research of CB Richard Ellis Vietnam Company (CBRE), retail sales and services at Vietnam’s current prices climbed 16 percent in the first six months of 2010, doubling the growth in the same period of 2009.

Seen as a potential market, the Vietnamese retail market has been growing rapidly with sales growth averaging at 23 percent per annum. Holding the fourth position among 30 countries most attractive to foreign retailers, Vietnam’s domestic market is expected to be a new destination for big global retailers.

Promising market

According to the market research of CB Richard Ellis Vietnam Company (CBRE), retail sales and services at Vietnam’s current prices climbed 16 percent in the first six months of 2010, doubling the growth in the same period of 2009.

This is resulted from rising incomes of Vietnamese people and growing optimism of Vietnamese consumers in employment and economy.

Making a debut in Vietnam in 1998 and struggling to find out the initial retail space, Big C has expanded to 10 supermarkets directly distributing consumer goods and necessaries in major cities like Ho Chi Minh City and Hanoi.

Ms Duong Thi Quynh Trang, PR Manager of Big C Vietnam, said: “In the last five months of the year, we will open a supermarket in Vinh city, Nghe An province. Big C’s current business is very good and we determinedly believe in the future development of the company.”

At present, some 30 foreign retailers have invested in Vietnam, focusing on mixed commercial centres, supermarkets, convenience stores, health and beauty salons, and food stores.

According to preliminary survey, most businesses are operating effectively and are expanding their business.

Marc Townsend, Managing Director of CBRE Vietnam, said: “We forecast that many more high-class retailers will enter your [Vietnamese] market. The main attentions are the young population and the fast urbanisation in the country. In addition to the industrialisation process, which results in technological advances, the increasing number of medium and high-income earners has led to changes in lifestyle, including a preference trend for foreign brands.”

Retail space fever

Despite being offered at a very high rental rate since being put into use in April 2010, Vincom Centre in Ho Chi Minh City has leased more than 90 percent of space. Similarly, finding a suitable retail point in the downtown areas such as Diamond, Saigon Square and Parkson is too difficult for many businesses, when most lessees have signed long-term rental contracts.

Currently, the average rental for ground floor and first floor is ranging from US$97 to US$124 per square metre a month, 2-3 times higher than renting a space far from the centre.

“Rentals in the downtown have continuously gone up while rates in other places have fallen down but it is still difficult to find out vacancies. Some places in the downtown are offering rentals at US$250 per square metre per month but the vacancy is rare,” said Ngoc, a sales manager for an importing and exporting firm in Ho Chi Minh City.

According to real estate specialists, the current supply for retail space in Ho Chi Minh City is nearly 318,000 square metres, allocated in 24 commercial centres and commercial complexes. The occupancy rate has reached nearly 95 percent.

By 2013, the supply is expected to treble the current rate. Unlike limited vacant retail space in the downtown, retail space supply outside the city centre is estimated to increase by more than 10 times thanks to the opening of many new large-scale commercial centres.

There have been many new retail spaces locating in non-business districts as in District 7 (Crescent Mall, Sunrise Shopping Mall), and District 2 (Metropolis). These new sources of supply are expected to help the city solve the problem of retail space shortage in the downtown for foreign investors. – KTDT

Tags: Vietnam retail market