APPD Market Report Article

Ho Chi Minh City

May 31, 2022

1.4%

USD 78

Rents
Stable

Demand comes from anchor tenants

  • Demand recovered in prime malls with nearly 14,000 sqm NLA absorbed across the city, thanks to anchor tenants relocating and expanding (i.e., Uniqlo, Kohnan). The occupancy rate in both submarkets increased and reached more than 95%, reverting to pre-pandemic levels.
  • Landlords have completed their floor restructuring plans, focusing more on major tenants who perform well and removing underperforming ones. Landlords also favoured anchor tenants who can help attract other tenants and bring credibility to the space.

Landlords remain cautious

  • In 1Q22, City Center had stabilised its retail stock at roughly 81,000 sqm without any obvious changes. City Fringe recorded no new stock to enter the supply in the quarter.
  • The supply in HCMC has remained tight over the past two years since landlords are still concerned about traffic in malls and have postponed their planned openings until they reach a satisfactory occupation rate at the pre-leasing stage.

Rents increase following the natural contract escalation rate

  • The net effective rents grew at a moderate rate of 1.4% and 1.3% q-o-q in City Center and City Fringe. The rent rates in most prime malls witnessed a natural growth of 2% per year, a strong recovery after two years of static rents in the context of the current high occupancy rate.
  • Positive signals from the City Fringe’s power purchase upsurge have alleviated investors’ concerns about the retail market gloom. Yield still decreased moderately in 1Q22.

Outlook: Rents to increase as the economy recovers

  • Based on the current development of the project, Vincom Grand Park’s launch date will likely be pushed back to 2023, instead of 2022 as previously stated. In 3Q22, HCMC retail market will welcome two new projects in City Center and City Fringe; namely, The Spirit of Saigon and Socar Mall and one renovated retail centre in a Prime location; namely, Union Square.
  • Due to the re-opening of the border in late 1Q22 and the corresponding increase in power consumption that supports the expansion of emerging retail chains, rents are expected to gradually increase. Food and beverage, convenience stores and pharmacies are expected to be the main drivers for demand for the remainder of the year.

Note: Ho Chi Minh City Retail refers to Ho Chi Minh City's overall prime retail market.

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