APPD Market Report Article

Hanoi

December 1, 2021

-17.1%

USD 52.4

Rents
Falling

Retailer demand remains stable

  • Thanks to landlord support policies for existing tenants, shopping malls in both City Centre and City Fringe were able to secure occupancy rates despite 2.5 months of lockdown; hence, most of prime malls in Hanoi recorded occupancy rates at over 90%, similar to 2Q21’s level.
  • Tenants appear to be hesitant in expansion activities and renewing lease contracts, waiting for the pandemic to be fully contained.

No new projects come online in the quarter

  • As the fourth wave of COVID-19 surged, the government was forced to implement strict social-distancing measures, which led to the closure of retail malls on 24 July.
  • As most construction work had to be suspended almost entirely in 3Q21 and is not expected to resume at full capacity anytime soon, the opening dates of some new projects, including one regional shopping centre and several retail podiums, have had to be postponed until the end of 2021 or early 2022.

Net effective rent decreased due to rental concessions policy

  • The asking rent and face rent of prime malls still held constant. However, landlords tended to offer attractive rental concessions or flexible leasing terms to existing tenants, such as a few months free rent during the lockdown period. Therein, the net effective rents in both City Centre and City Fringe significantly dropped by 16.7% q-o-q.
  • Market yield remained relatively stable in expectation of a long-term market potential. Capital value decreased in tandem with the drop in net effective rents but is likely to recover in the coming quarters.

Outlook: Market sentiment is expected to improve post-lockdown

  • Vincom Mega Mall Smart City is scheduled to open in 4Q21, providing approximately 40,800 sqm to City Fringe stock. It should be noted that given the complicated situation created by the pandemic, the grand opening of this project may be delayed until 1Q22.
  • The market sentiment is expected to bounce back once the lockdown is lifted. Consumers will likely shop more in malls after a prolonged period of lockdown due to limited entertainment and retail options. Given the current rental incentives provided by landlords, this could be a good opportunity for tenants with strong financial capability to search for new retail space.

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

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