APPD Market Report Article
HanoiAugust 26, 2022
Trang Le, Head of Research, Vietnam
Demand surges in city fringe
- The Hanoi retail market in 2Q22 recorded a total net absorption rate of 45,534 sqm across both submarkets, contributed to by the recovery of demand for entertainment post-pandemic, which demonstrated the positive recovery of purchasing power. CBD prime malls saw net absorption of 247 sqm in 2Q22, while net absorption in the city fringe increased due to new supply, reaching 45,387 sqm.
- One of the most notable transactions in the quarter was the opening of a new 1,700 sqm MUJI store in AEON Mall Ha Dong. Digibox, an emerging retailer from Indonesia, was also noteworthy in opening a series of stores at Vincom Center Ba Trieu, Vincom Center Nguyen Chi Thanh and AEON Mall Long Bien.
The market welcomes one new building, Vincom Mega Mall Smart City
- The Hanoi retail market recorded one new supply source, Vincom Mega Mall Smart City, in Nam Tu Liem District, after several delays due to the pandemic. The total market supply increased by around 5%, reaching 1.1 million sqm (NLA), with non-CBD areas still accounting for the majority of supply.
- Except for Indochina Plaza Hanoi in Cau Giay, which was still being renovated at the time of this report, all prime malls in Hanoi have reopened. In general, the vacancy rates in both the city centre and city fringe improved q-o-q, to 11.9% and 10.2% respectively in 2Q22.
Rents remain stable in city centre, but increase in city fringe
- Net effective rent in the city centre recorded at USD 63.6 sqm per month, remaining stable q-o-q, while that of the city fringe recorded at USD 29.3 sqm per month, increasing by 1.9% q-o-q. The rent increase in the city fringe was mainly due to higher-than-average rents in the new Vincom Mega Mall Smart City and annual adjusted prices in some shopping malls with high occupancy rates.
- Due to the recovery of net effective rents, capital value has increased by 1.5% q-o-q and 3.2% q-o-q in the city centre and city fringe, respectively. Yield was slightly compressed by 50 bps y-o-y in 2Q22, owing to investors’ bullish outlook for the Hanoi retail market in the medium- and long-term.
Outlook: Market expects stronger growth despite inflation risks
- The market should not see any new supply until 2023, when a large-scale project is set to be put into operation in the city centre. Regarding the market performance, occupancy rate in existing retail prime malls is expected to improve as customer purchasing power rises alongside market recovery.
- The inflation rate risk, however, will affect purchasing power. As a result, in order to attract more customers, shopping centres are likely to strive to create new concepts in order to meet the needs of customers of all ages, such as combining green areas and cultural elements to create a new shopping experience.