Developers get retail wake up

Developers need to hit the ground running if they are to find new retail space

Retail stocks in the southern economic hub currently stand at 0.02 square metre per capita, much lower than regional cities such as Manila and Bangkok, which have 0.46 and 0.59sqm per capita respectively.

Although Vietnam’s monthly disposal income per capita is around $38, or just half the Philippines and a fourth of Thailand, Ho Chi Minh City’s figure is much higher than the national average, hitting $160 a month.
Rik Mekkelholt, head of CB Richard Ellis retail consultancy, said taking into account the retail space available per capita in cities like Manila and Bangkok the retail space in Ho Chi Minh City could rise at least five times more than current limited stock of 150,000sqm when World Trade Organization rules take effect.

Foreign retailers are now allowed to team up with local partners, but their stake should not exceed 49 per cent of a joint venture’s registered capital. However, from early next year, foreign retailers are permitted to establish 100 per cent, foreign-owned business.

The second city currently has a retail stock of 150,000sqm spanning 13 shopping centres and department stores. Average occupancy rate reached 92 per cent and monthly average rental rates are hovering at around $40. Yet, central business district shops are often fully occupied and super prime rents have gone beyond $200 per sqm a month.

Street stalls and shop houses are still dominant, but potential for modern retail outlets such as supermarkets and shopping malls is high. There are opportunities to build more in the second city as the new stock under construction will hit 150,000sqm over the next three years.

According to CB Richard Ellis, greater demand for new products and entertainment is translating into a need for larger-sized shopping centres to feed demand and enhance the shopping experience.
As consumers having less time to travel for their shopping needs, retailers expand to be more accessible and each district can easily host a large hypermarket.

More international experienced retail developers are active in the market, including Koreans, Taiwanese, Singaporeans and Malaysians bringing a new dimension to shopping in Vietnam.
Some of the larger shopping malls are the 25,000sqm Saigon Palace and the 22,000sqm Everich in District 11, the 12,000sqm Royal Centre in District 1 and the $30,00sqm Sunrise in District 7, which are expected to open in the next two years.

Retailers such as Parkson and Lotte Mart are aggressively expanding. Parkson has opened two department stores in the city and is expected to launch on more in the 18,000sqm CT Plaza in the second quarter this year. Lotte Mart is building a 33,000sqm mall in District 7, which is expected to open early next year and will anchor another in the Everich late next year.