Supply of retail space in Hanoi will increase very rapidly in the next three years

In recent years, supply of retail space for rent has always been scarce, especially in the urban central area, the occupation rate at shopping centres has always been high (at nearly 100 percent).
According to preliminary statistics of CBRE, Hanoi currently has about 118,000 square metres of leasing space, up by about 15 percent over 2009. In the last five years, the supply of retail space has doubled compared to the current figure, but the increase volume was just around 50,000 square metres.

Retail growth rate of Hanoi retail market in 2010 was about 30 percent, GDP per capital in Hanoi was at around $1,950. Hanoi is considered one of the major cities having vey high shopping demands. Meanwhile, supply of retail spaces for this market has been very limited in the last few years.

Therefore, similar to the office leasing market in previous years, rental rate for retail space has always been high, especially for downtown projects, where rental price could be up to hundreds of dollars per square metre per month. According to market report in late 2010 of a number of consulting units, price of some retail spaces around Hoan Kiem Lake has increased to $180 per square metre per month.

At present, retail market has various advantages and great potential. Pham Manh Cuong, general director of Savico Hanoi said that Vietnam’s retail market has very high annual growth rate of 30 percent, and the shopping habits at shopping centres have changed rapidly. Savico has paid attention to this market since 2007, thus the launch of Savico Mega Mall project at present time is also a good opportunity.

With the increasingly high demand and the development of new urban areas, large-scale shopping centres will become popular retail model in the future. Therefore, currently, there are many projects are or will be implemented in the next few years such as Royal City (230,000 square metres), Keangnam (62,786 square metres), Ciputra Shopping Mall (120,000 square metres), U-Silk City (146,896 square metres), etc. Except Keangnam, other projects are scheduled for completion in 2013-2014 period.

In the last five years, the growth of retail space supply in Hanoi averages more than 30 percent, equivalent to nearly 20,000 square metres per year. However, the supply will rise sharply when two large projects will be completed in 2011, including Savico Mega Mall with about 45,000 square metres of retail space and Keangnam with about 62,000 square metres. In addition, Pico Mall project in 229 Tay Son Street is expected to be in operation in April 2011 with total retail space of 30,000 square metres.

According to estimates, total retail space in Hanoi will increase by about 228,000 square metres over 2010, and will increase by about 328,000 square metres in 2012. By 2013, supply of retail space will tend to decrease, and total supply will increase by about 220,000 square metres. Thus, in the next three years, supply of retail space in Hanoi will increase strongly.

Cuong said that investors would increasingly become more involved in commercial centre projects, therefore the supply would be very abundant in just a few years. Regarding price trend, he said that in the next few years when supply is high, high rental price of up to $100 per square metre per month would no longer exist.

Rental rate of retail space in Hanoi differs very much in two areas. Central area, due to location advantages, scarce supply as the land is limited for the construction of new large-scale projects, the rental price thus is very high, could be up to $100 per square metre per month in central shopping centres such as Trang Tien, Hang Da Market, Vincom, etc.

According to the latest report of CBRE, average leasing prices in Hanoi are about $45.58 per square metre per month and $36.6 per square metre per month outside the central area. These rental prices have reduced by about 3.8 percent compared to the fourth quarter of 2010.

Grand Plaza at present is launching campaign to reduce rental rate by up to 18 percent in order to attract customers. Some projects which will be open in the near future such as Hang Da Market (open in August 2011), Pico Mall (open in April 2011, with 70 percent of total space has already been leased) and Savico Mega Mall (open in November 2011, with 46 percent of total space has already been leased), etc. Vincom shopping centre has been improved and upgraded, and Trang Tien Plaza is going to also be upgraded, etc.

At the press conference to announce Savico Mega Mall project on March 9, 2011, Richard Reech, director of CBRE Vietnam said that the current rental rate for retail space in the central area of Hanoi is very high, and it might be under great pressure when a series of major projects would be launched. – CafeF

Tags: Vietnam retail market, Vietnam retail spaces