Realty consulting firms forecast HCMC will see ample retail area supply in the next three years due to the presence of numerous new projects or near-completion ones in the city. Despite the gloomy outlook of the property sector, developers are still completing their ongoing projects or starting up new ones that have been idle for years.

Supply boom

Property consulting firms observe that there will be huge supply for the city’s retail space at commercial centers and supermarkets in the next three years.

For instance, Saigon M&C Real Estate has entrusted CB Richard Ellis Vietnam (CBRE) to market and manage the six-floor commercial area covering up to 13,000 square meters in its 41-storey Saigon One in District 1. Located on the corner of Ham Nghi and Ton Duc Thang streets in downtown HCMC, the building will be commissioned this year.

Many other commercial center projects underway in the inner city will also be operational in the same year. Of these, Vincom Center A, bordered by the four streets of Dong Khoi, Nguyen Hue, Le Loi and Le Thanh Ton, is designed with six basements and nine floors. It is set to open in October this year, providing 38,000 square meters of retail space. Not far away is the near-completion Times Square promising to contribute more extensive retail space to the market.

To the north of the city, the Pico Saigon Plaza located on Cong Hoa Street in Tan Binh District sets aside five floors for commercial use and services totaling up to 32,000 square meters. To the south, the Sunrise City with five stories will supply over 70,000 square meters for retail space. Besides, several condo buildings whose construction is close to completion citywide will also offer retail space as well.

Rental on downtrend

The retail space segment in HCMC still remains stable in terms of business compared to serviced apartments and office leasing segments in the real estate market as remarked by realty services providers. However, their surveys indicated the local demand for retail space has mildly eased while project owners are competing with each other fiercely to lure tenants. Now retailers no longer face difficulties in access to shopping centers in the downtown area with sky-high rents as they did before.

The changing situation is attributed to rising retail space supply plus the fact that business situation in commercial centers is not always propitious in the current context.

Notably, the Kumho Asiana Plaza in District 1 and the Saigon Paragon in District 7 have suffered from poor business performance and are changing business models. A FiviMart supermarket in Phu My Hung urban area was closed upon the expiry date of the leasing contract while owners of high-rise office buildings have to scale down their retail space for lease to survive tough times.

Data collected by Colliers International Vietnam show that the average rent of commercial centers in the first quarter stayed at around US$70.6 per square meter per month, or a contraction of some 4% from the previous year.

The same woe hits the 68-floor Bitexco, with half of its six-storey retail area still unoccupied after over one year of operation, even though the rent was lowered to US$64-110 a square meter a month from the initial US$78-120.

Potential still in sight

Real estate services providers, however, are still confident of the market in HCMC in the next few years despite the ample supply.

Local retailers and market observers said the nation’s commercial area supply is still modest compared to other regional countries. They deem present difficulties temporary and reaffirm HCMC is an ideal business destination in the long run.

This year’s market survey conducted by Knight Frank showed Vietnam is still among the world’s top retail markets. The Ministry of Industry and Trade earlier reported the local retail sectors gained an impressive year-on-year growth of 29.3% in 2011 and expected commodities and services sales would keep growing 20% per annum on average in the next five years.

Also, Colliers International Vietnam highly valued potential of the HCMC retail market thanks to its young population, high urbanization pace and fast-growing disposable incomes. This explains why Parkson, Lotte and Big C have insisted on expanding operations in Vietnam while Japan’s Takashimaya, Aeon and Singapore-based Temasek have been undergoing necessary procedures to join the local market.

Source: SGT