2019 is expected to witness a sizeable amount of new supply coming on stream in retail real estate in Ho Chi Minh City, approximately 394,000 sq m gross floor area (GFA) from 12 projects located in non-CBD areas, according to JLL’s latest report. Ten of the 12 projects are retail podiums in mixed-use projects.

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Tenants who require large spaces, such as clinics, education providers, and entertainment providers, etc., continue to fill up vacant space in upper floors of retail centers that usually attract less foot traffic compared to lower floors.

Foreign retailers are expected to expand their penetration in the CBD sub-market. Centers in non-CBD areas with continuously improving infrastructure, amenities, and new concepts are likely to perform better.

In 2018, the total Ho Chi Minh City retail stock increased to 1,026,706 sq m GFA. The market added a total of 138,648 sq m GFA of new supply from three large shopping centers: Van Hanh Mall, Vincom Center Landmark 81, and Estella Place, the latter of which was put into operation in December. Three department stores withdrew from the market during the year: Parkson Flemington, Parkson Cantavil, and RomeA.

Despite the entry of new supply and two more shopping malls undergoing restructuring, the overall occupancy rate increased 34 basis point quarter-on-quarter, revealing positive demand in the market. Estella Place recorded good occupancy rates, at about 85 per cent at opening time, thanks to a good project concept and the solid reputation of the developer.

F&B and entertainment tenants continued to show good performance and remained the most active group of tenants in the city.

The overall market rent was around $47.6 per sq m per month, up 0.9 per cent quarter-on-quarter and 2.8 per cent year-on-year. In both CBD and non-CBD areas, several shopping malls restructured their layout and reviewed rents upwards for new tenants, resulting in an increase in average rents in both sub-markets.

New supplies to uplift Hanoi real estate market

Hanoi’s real estate market is set for a record-breaking new supply of apartments and hotels in 2019 while the office sector is also predicted to enjoy a bright future, according to real estate service provider Savills Vietnam.

The apartment sector was highlighted in a report updating the performance of Hanoi’s real estate market in the fourth quarter of 2018, released by Savills Vietnam on January 9.

Eight new projects, along with the next phases of 28 other projects provided the Hanoi market with nearly 15,100 units during the last three months of 2018, up around 120% on-quarter and on-year.

Transactions rose by 81% on-quarter and 69% on-year whilst the absorption rate increased by 9 percentage points (ppt) on-quarter and 5 ppts on-year to 34%. The average asking price was US$1,370 per square metre, up 10% on-year. Grade B accounted for 61% of the stock, followed by Grade C with 31%. 

Savills predicted that more than 41,300 units from 36 projects would enter the Hanoi market in 2019, most of them being Grade B.

As for the hotel segment of the Hanoi market, Savills expected three new four-to-five star hotels to provide the market with approximately 480 additional rooms in 2019.

During the fourth quarter of 2018, hotel stock decreased by 1% on-quarter and on-year due to the withdrawal of a three-star hotel.

The average hotel occupancy slightly increased by 1 ppt on-quarter but dropped by 2 ppts on-year. Notably, the average room rate (ARR) rose 14% on-quarter while the average revenue of five-star hotels was US$116 per room per night, double that of four-star hotels and triple that of three-star hotels.

Meanwhile, office stock remained stable in the fourth quarter of 2018, at nearly 1.7 million square meters. The supply of Grade A offices remained unchanged whilst Grade B welcomed two new buildings. 

Overall, the market performance of the office sector remained steady on-quarter and on-year, but the most significant change occurred with a year on year hike of 3% in average gross rent. An improved Grade A performance in central business district (CBD) areas underpinned an upward trend overall despite a slight quarter-on-quarter reduction in CBD rent.

Savills stated that five Grade A projects are expected to enter the Hanoi market in 2019 while predicting a new supply to the office sector of approximately 500,000 square meters by 2020.

VN Economic Times/VOV