APPD Market Report Article

Hanoi

February 28, 2022

1.1%

USD 62.8

Decline
Slowing

Net absorption drops to negative level

  • Negative net absorption of -1,000 sqm clouded the Hanoi retail market in 4Q21. The lingering impact of COVID-19, together with customers’ low purchasing power, resulted in revenue shortfalls for many tenants, forcing them to close their physical stores at shopping malls.
  • Meanwhile, deep-pocketed tenants were quite hesitant with their expansion activities. One of the market bright spots in 4Q21 was the opening of Uniqlo in AEON Mall Ha Dong, with around 1,000 sqm NLA.

No new completions in 4Q21

  • There were no new launches in 4Q21. Given the complicated development of the pandemic, the pre-commitment rate in some shopping malls was relatively low. As a result, many landlords delayed their grand openings to 2022.
  • The COVID-19 resurgences have impacted the improvement in occupancy rates in Prime Malls during 2021. Compared to 4Q20, the vacancy rate was slightly decreased by 1.1% in the City Centre, while the figure for the City Fringe remained quite stable at 9.2% in 4Q21.

Net effective rent bounces back to 2Q21 levels as malls reopen

  • All rent concessions have been removed after the lockdown. Hence, the net effective rent bounced back to the pre-lockdown level of USD 62.8 sqm per month in the City Centre, and USD 28.6 sqm per month in the City Fringe. Yet, landlords were willing to negotiate with tenants to provide support on a case-by-case basis.
  • Due to the recovery of the net effective rent, capital value surged by 21.5% q-o-q and 21.7% q-o-q in the City Centre and the City Fringe, respectively. Yield fell by 0.5% y-o-y in 4Q21, owing to investors’ positive long-term outlook for the Hanoi retail sector in the medium term.

Outlook: New supply to enter the City Fringe in 2022

  • In the next 12 months, Hanoi retail market is expected to welcome 40,800 sqm of prime retail space coming from Vincom Mega Mall Smart City in the City Fringe area.
  • Demand is expected to pick up in the next 12 months as the vaccination roll-out has been accelerated nationwide. Therefore, net effective rent is expected to increase by 2-3% y-o-y in both submarkets by end-2022.

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

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