APPD Market Report Article

Hanoi

May 31, 2022

2.4%

USD 64

Rents
Stable

Demand remains modest across the market

  • Prime malls continued to be affected by the COVID-19 epidemic, especially when the situation in Hanoi became more complicated in 1Q22, reflecting a negative net absorption of -6,400 sqm in the City Fringe area. CBD prime malls remained resilient, with positive but modest new net absorption recorded.
  • Despite one notable deal of 1,000 sqm in AEON Mall Ha Dong, the negative net absorption trend continued as domestic small retailers were forced to close unproductive stores. Some tenants that provided services, such as game zones and kid’s playgrounds, were also temporarily closed as customers tended to avoid crowded activities.

No new supply comes online in 1Q22

  • The Hanoi retail market’s total supply remains stable at 1.09 million sqm NLA, mainly in non-CBD areas. Given the complicated development of the Omicron variant and the accelerating number of cases in Hanoi, Vincom Smart City, a new project expected to launch in 1Q22, had to delay its opening plans.
  • Some malls, such as Indochina Plaza Hanoi in the Cau Giay, took a chance and renovated during low-traffic COVID-19 times. In general, vacancy rate in City Centre improved as most stores have reopened, reaching 12.4% in 1Q22. However, with the exception of the a notable deal recorded in AEON Mall Ha Dong, City Fringe malls have seen softening demand, with the vacancy rate edging up to 10.6%.

Rents inch up as malls resume operation

  • Overall, rents of prime malls in the City Centre and City Fringe reached USD 64.2 per sqm per month, and USD 28.8 per sqm per month, respectively, in 1Q22. This marked slight improvements of 1.3% and 0.3% q-o-q, respectively.
  • Net effective rent in both markets increased slightly as shopping malls returned to normal operations and landlords sought to increase rents following the normal contract escalation rate, which had been suppressed for two years due to the pandemic. However, landlords still negotiate the best rent prices for tenants based on their product category, lease area and leasing term.

Outlook: New supply set to enter City Fringe area in 2022

  • Vincom Smart City will be the highlight of new supply in 2022, providing 40,800 sqm. Regarding market performance, the occupancy rate in existing retail prime malls is expected to increase as customer purchasing power will improve in line with market recovery.
  • As customer spending power improves and shops are able to expand their operations, the vacancy rate in both the City Centre and the City Fringe will gradually fall. Foreign brands will be the primary driving force behind retail demand.

Note: Hanoi Retail refers to Hanoi's overall prime retail market.

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