New set-ups and expansions drive leasing activity in malls

• City Centre net absorption totalled 500 sqm in 1Q24, with notable leases such as Botejyu and Dozo Sushi in Vincom Metropolis, while City Fringe net absorption increased by 29,000 sqm, driven by new leases in various malls, including Kubo’s expansion of 1,306 sqm in Vincom Smart City, Grandbois at Vincom Nguyen Chi Thanh, Don Chicken at Lotte Mall West Lake and Cheong Hak Gol at Vincom Royal City.
• Lotte Mall West Lake’s net absorption contributed 80% of City Fringe’s total in 1Q24. Lotte Mall West Lake Hanoi’s successful leasing and rapid space uptake amid economic difficulties highlighted strong leasing activity and high demand for high-quality retail space in the City Fringe overall, as well as in the project itself.

No new retail projects complete in 1Q24

• No new retail projects were completed in 1Q24, keeping Hanoi’s retail supply at 671,200 sqm. The City Centre maintained its supply at 55,000 sqm, while the City Fringe supply remained at 616,300 sqm.
• In 1Q24, the Hanoi retail market saw a vacancy reduction in both City Centre and City Fringe. City Centre vacancy fell to 3.9%, a 0.9% q-o-q decrease, driven by sustained demand for prime mall spaces and limited new supply, while City Fringe witnessed a more significant drop from 11.3% to 6.6%, largely attributed to the official launch of major tenants at the newly opened Lotte Mall West Lake.

Retail market remains resilient with stable rents

• In 1Q24, Hanoi’s City Centre and City Fringe areas maintained relatively stable net effective rents, recording USD 65.3 per sqm, per month and USD 33.7 per sqm, per month, respectively.
• The City Centre’s net effective rent experienced a 2.4% y-o-y increase, while the City Fringe submarket saw a more substantial 7% y-o-y growth in net effective rent, demonstrating the market’s resilience amidst the current economic landscape.

Outlook: Modest rent growth is expected in the coming quarters

• Hanoi retail market is expected to see divergent supply trends across submarkets by 2024. City Centre is forecast to maintain stable supply, reflecting the area’s established retail landscape and limited room for new projects. Meanwhile, the City Fringe is poised for growth, with supply projected to reach 635,600 sqm, primarily driven by the anticipated completion of The Heritage Mall in Tay Ho.
• Rents are expected to improve further. The City Centre is forecast to see stable or modestly higher net rents, while the City Fringe is anticipated to witness more pronounced growth. The introduction of high-quality new supply in Tay Ho in City Fringe will drive rents higher, yet the growth might be impeded by rising competition.