APPD Market Report Article


September 4, 2023

Trang Le, Head of Research, Vietnam


USD 65.1


Abundant demand is well supported by flexible leasing policies

  • Stable and healthy rental demand continued in both submarkets. City Centre recorded a net absorption of 827 sqm, up 116% q-o-q thanks to the new lease of Lotte Department Store in Trang Tien Plaza. Meanwhile, in the City Fringe, thanks to new tenants in The Loop Shopping Centre (formerly, Indochina Plaza Hanoi), absorption increased to about 8,300 sqm, a 2.5-fold rise over the previous quarter.
  • If 1Q23 witnessed the proliferation of international F&B brands, 2Q23 witnessed many domestic F&B closures due to the tightening of spending amid economic headwinds. However, some centres in the City Fringe have taken advantage of the empty space to diversify tenant profiles, including co-working space, spas, pet care and DIY stores, to enrich the customer experience and improve occupancy rates.

The Loop Shopping Centre changes its brand positioning

  • No new Prime supply was recorded. Indochina Plaza Hanoi completed renovations in May and changed its name to The Loop Shopping Centre. Under the management of Takashimaya, this mall has also changed its brand positioning and become a lifestyle shopping mall with a mix of both luxury and casual brands, targeting young people instead of being limited to IPH residents.
  • The total supply of Prime Malls in Hanoi remained unchanged at about 55,000 sqm in the City Centre and 525,700 sqm in the City Fringe. The vacancy rate decreased by 1.5% q-o-q to 5.3% in the City Centre area. The City Fringe area also saw the vacancy rate drop by 1.6% q-o-q to 6.3%, due to active leasing activity at The Loop Shopping Centre.

Net effective rent increases slightly due to strong demand

  • Net effective rent in the City Centre grew slightly by 2.1% q-o-q and 2.3% y-o-y, reaching 65.1 per sqm per month due to the good rental performance at Trang Tien Plaza and Vincom Ba Trieu Tower B. City Fringe followed the rent growth momentum with an increase of 3.5% q-o-q and 6.9% y-o-y, reaching USD 32.4 per sqm per month due to the new rental strategy and renovated space at The Loop.
  • Capital values increased by 3.1% in the City Centre and 3.8% in the City Fringe as a result of investors’ positive outlook for the Hanoi retail market. The overall market yield continued to compress in the quarter by 7 bps for all submarkets, to 7.8% in the City Centre and 9.3% in the City Fringe.

Outlook: The market continues to show positive signs

  • The decentralisation trend in the Retail market is expected to be shown clearly in 2H23 with two new completions in the City Fringe, which are the 80,000 sqm NLA Lotte Mall Tay Ho and the 10,600 sqm NLA The LinC Park City in Ha Dong. Vacancy rate is likely to compress further to 4.0% in the City Centre, and increase to 11.7% in the City Fringe due to expected new supply.
  • Rents are expected to grow steadily at 4.0% y-o-y in the City Centre and 3.1% y-o-y in the City Fringe area in 2023. New high-quality supply will come online in the West Lake area, City Fringe submarket, from 2024 and is expected to push rents up even higher. Capital values are expected to also follow the trend and increase 11.1% y-o-y in the City Centre and 15.1% in the City Fringe.

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

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