APPD Market Report Article

Ho Chi Minh City

February 28, 2022

0.0%

USD 76.8

Decline
Slowing

Weak demand causes negative net absorption across all malls

  • Post-COVID-19 wave demand was sluggish, with several local brands withdrawing in 4Q21, leading to negative net absorption. While occupied space in B1 levels remained stable, demand for upper floors weakened y-o-y. Tenants on 4th and 5th floors above ground, mostly high-end brands and food & beverage, were severely impacted by the pandemic and were forced to return spaces.
  • The demand driver was mainly from Uniqlo − a Japanese fast-fashion retailer − with the expansion in Level 4, Saigon Centre, of an estimated 3,000 sqm.

Foot traffic resumes slowly after reopening in early October

  • HCMC has lifted social distancing measures since early October and allowed shopping malls to operate, yet footfall has resumed slowly. No new supply was recorded in 4Q21, as all scheduled projects deferred their launch plans to 2022, including the under-renovation Union Square shopping mall, which is having difficulty finding tenants.
  • Vacant space increased significantly post-outbreak, due to softening demand. After four months of lockdown, around 20,000 sqm was added to the total vacant space by end-4Q21.

Rent concessions lifted after reopening

  • The net effective rent recovered to the normal level when all malls reopened in early October. Despite the removal of the rent concession policies, landlords were nevertheless willing to deal with renters on a case-by-case basis to provide support.
  • Yield continued to compress slightly since investors were still looking for investment opportunities in this fast-growing city with a population of ten million, despite the pandemic.

Outlook: Market to improve in 2022

  • New supply is expected for 2022, including Union Square in the City Centre and Socar Mall in the City Fringe, which deferred it’s opening plans from 2021, because they could not meet the expected occupancy rates in the year.
  • In light of the new supply and recovery demand post-COVID-19, rents are expected to increase, reaching USD 90.4 per sqm per month, and USD 37 per sqm per month, in the City Centre and City Fringe, respectively, by end-2022.

Note: Ho Chi Minh City Retail refers to Ho Chi Minh City's overall prime retail market.

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