Foreign retail brands lead demand

• Demand continued to rise, albeit at a slower rate, as purchasing power increased. Both submarkets recorded positive net absorption, with about 1,500 sqm in City Centre and 3,300 sqm in City Fringe. Tenants tended to leave old/pre-renovated malls, while new expansions appeared in modern malls. Vincom Ba Trieu Tower C, Vincom Royal City and Vincom Times City had high absorption of over 1,000 sqm.
• Retail was the main driver of the market, especially for foreign brands. The most prominent expansion was Uniqlo with three new stores in Vincom Center Ba Trieu Tower C, Vincom Mega Mall Royal City and Vincom Center Tran Duy Hung. Other popular retail brands, such as LYN, Aristino, Keds, and Gustavo Gano, also expanded their presence with new stores in Vincom Ba Trieu and Vincom Times City.

Renovated malls drive net absorption in City Centre

• No new supply was recorded in the quarter, making Vincom Mega Mall Smart City the only new completion in the Hanoi retail market in 2022. The vacancy rate in the City Centre dropped significantly from 10.2% in Q3 to 7.5% in Q4 thanks to the strong take-up in Vincom Center Ba Trieu Tower C. City Fringe also saw a lower vacancy rate, recording 8.4% in Q4.
• Located in a prime location, Vincom Center Ba Trieu Tower C completed renovations in 4Q22 and attracted mainly foreign clothing brands despite its small space of only 7,402 sqm NLA. Meanwhile, Indochina Plaza Hanoi was still under renovation in 4Q22. Most F&B tenants have moved out or temporarily stopped their operations in Indochina Plaza Hanoi due to the constant noise from the long renovation.

Net effective rent remains stable in both submarkets

• Overall net effective rent in City Centre and City Fringe remained stable. In City Centre, the average net effective rent was USD 63.7 per sqm per month, up 0.2% q-o-q, while that in the City Fringe was USD 29.4 per sqm per month, up 0.2% q-o-q. Higher rent was recorded in Vincom Centre Ba Trieu Tower C and Vincom Mega Mall Times City thanks to active leasing activity.
• Backed by a long-term positive outlook, capital values increased slightly in both the City Centre and City Fringe, by 1.7% and 1.5% q-o-q, respectively. The overall market yield continued to compress to 8.0% in the City Centre and 9.5% in the City Fringe.

Outlook: Two new projects set to open in 2023

• Tien Bo Plaza is expected to launch in 2023 and contribute 50,000 sqm NLA retail space to City Centre. In City Fringe, the total NLA of Lotte Mall Hanoi was cut down from 150,000 sqm to 80,000 sqm to make room for the hotel and serviced apartment components. This mall is currently under construction and is expected to open in the second half of 2023, earlier than previously expected.
• Occupancy rates in existing malls will likely increase as purchasing power remains healthy, while new supply should push up demand as its modern development features attract higher footprint. City Centre rents should remain stable as existing malls aim to maintain full occupancy. Meanwhile, higher Lotte Mall Hanoi rents are expected to raise City Fringe’s average rent by 10.1% y-o-y in 2023.