Purchasing power low forces retail premises rent down

The retail premises market has cooled down since the end of 2010. Leasers now have to offer low rent to retailers because of the decreasing demand.

A report released in late 2010 by CBRE in HCM City showed that the percentage of unoccupied retail premises had increased considerably by 8.7 percent by the end of the year in comparison with the previous quarter.

Buying low, sales decreasing, retail premises rent also decreasing

Thu, the owner of a clothes kiosk at An Dong Plaza shopping center in district 5 in HCM City has given back the retail premises on the second floor of the center. She has moved to a kiosk on the first floor near the escalator which has a monthly rent of 20 million dong. One year ago, small merchants had to pay 30 million dong a month for such a kiosk. As such, the rent of the kiosks on the first and second floor at An Dong Plaza has reduced by 20-30 percent.

“The purchasing power has been decreasing. Therefore, I have to move to the first floor where there are many visitors. It is difficult to sell goods if you sit on the second floor,” she said.

“Due to the high inflation rate, people, including high income earners, are reducing their purchases, thus causing big difficult to retailers. Therefore, it is the responsibility of retail premises leasers to help retailers,” said Trieu Huong Giang, Deputy General Director of Zen Plaza shopping mall.

Zen has calculated that the sales in March 2011 dropped by 15 percent in comparison with the same period of the last year. Therefore, it has decided to launch more and longer lasting sales promotion campaigns. Also according to Zen, only several shopping malls in district 1 have a turnover that is decreasing by less than 20 percent. Other shopping malls in other districts remain in severe shortage of patrons.

Even Ben Thanh Market, which is well known as the place which sets the highest retail premises rent in HCM City, at 40-42 million dong per square meter, also has to reduce rent. The kiosks located on the most advantageous positions in the market have not had their rent changed, but the kiosks on other positions all have reduced by 10-20 percent. The kiosk of Nguyen, located at the western entrance, specializing in selling bags and wallets, had a rent of 15 million dong per square meter last year, but now can be leased for 11 million dong per square meter.

Slow sales forcing merchants to reconsider business

In general, leasers always raise the rent for retail premises after a certain period. However, the rent increase does not occur in the first quarter. Thuy, the owner of a fashion shop on Nguyen Dinh Chieu street, said she has given back a 6 meter wide room on the same street to move to another room with smaller area.

“I asked the leaser to keep the rent the same, but he insisted on the raising it to 22 million dong a month. However, as it is very difficult to do business at this moment, I have decided to move to another place which has a lower rent of 14 million dong,” she said.

Believing that purchasing power is not likely to increase, Uy, the owner of the fashion shop chain Senti and A&T, has also given back his retail premises at high grade shopping centers. He is only keeping his street-front shops. “The landlords, who have signed contracts with me, do not intend to raise the leasing fee, while other landlords are avoiding leasing via brokers in order to reduce commission fees,” he said.

According to Savills Vietnam, a real estate service provider, by the end of 2010, there had been six grocery centers, 20 shopping centers, six retail areas, 58 supermarkets and three wholesale supermarkets which cover an area of 625,000 square meters, an increase of 27 percent if compared with 2009. The increases are not the same in different districts: the supply of retail premises increased by 58 percent in the central area and by 24 percent in the suburbs. Districts 2 and 7 have caught special attention from retailers because they are near the center and have a high population density.

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