Vietnam - Oversupply pressures may further lower retail space rental

The retail space rental in trade centres of HCM City in 2012 is expected to fall further according to the downward trend of 2011 because of oversupply.

In the last three months of 2011, HCM City had extra tens of thousands of square meters of retail area, which was seen as one of reasons that is why the retail space offering price plunged in Q4 and may continue decreasing in this year.

Particularly, in last December, Index Living Mall retail centre in Dist 4 was opened for which extra 7,000 sqm of retail area was provided to the market. Earlier, Crescent Mall in Dist 7 had been inaugurated with total space of 45,000 sqm. Districts 2 and 8 also joined the race with The Vista and Carina Plaza which supplied total 11,200 sqm. Actually, the new trade centres still have high vacancy ratio plus remaining supply resource of previous 3 quarters, which is pressuring on prices of the market segment.

According to CBRE Vietnam, the signals including increasing supply and high vacancy ratio may pull down retail space retail of HCM City within this year. In Q4 of 2011, the rental of centre areas stayed at $112.9 per sqm per month, down 5.3% on quarter and 10% year on year while that of outskirt areas was offered at $31.38/sqm/month, falling 3.7% and 8.1%, respectively.

Another consultant Savills Vietnam assessed that the rental of retail space along with roads was equal to 30-40% of offering price at trade centres in centre areas of HCM City that is forecasted to have the largest retail area, accounting for up to 60% of total future supply.

Meanwhile, the report of Colliers International indicated that the retail space rental in major roads, trade centres factually is declining average at 4-9% due to the highly increasing supply in short term. In Sep-Dec 2011, HCM City’s retail space surged 33,400 sqm against the previous quarter.

Inflation and economic difficulties made number of shoppers fall 15-30%. The high-class retailing market also suffered strong impacts due to people cut spending, which caused higher pressure on brand names which are renting space in trade centres this year, Colliers International explained.

VietBiz24

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