Predicted positive outlook for HCMC’s retail sector

According to CBRE Vietnam, Ho Chi Minh City welcomed five new retail properties in the beginning of 2015, providing more than 100,000 square metres gross floor area (GFA) to the market.

Positioned in District 7, SC VivoCity offering 62,000 square metres of retail space will be completed in the first quarter this year. Another shopping centre opened in January is Vincom Thu Duc, comprising 27,860 square metres of retail space.

Saigon Square 3 and Hung Vuong Square are two new bazaars that have been launched recently, with retail spaces of 3,100 square metres and 9,500 square metres respectively. A supermarket in Go vap district known as Aeon Citimart, a joint venture between Aeon and Citimart, was officially opened last week.

“From 2015 onward, there will be approximately 1.3 million square metresfrom 62 future projects. However,only 25 per cent of future projects is currently under construction and completing,” said Savills Vietnam.

In the latest report released by Savills, it is expected that 362,000 square metres will be brought to the retail market in next two year, increasing mainly in Ho Chi Minh City’s new urban areas. Especially, District 7 will account for 65 per cent of the market share.

In the fourth quarter of 2014, Ho Chi Minh City’s total retail stock was nearly 900,000 square metres. This slight increase drives the average occupancy rate of 92 per cent, making it the highest level in the past five years. Meanwhile, all segments’ rent was stable compared to last quarter.

The retail market fared well because most of mid and low-end products brought to the market have met the demands of the purchasers. More importantly, the city has a total population of eight million with the highest rate of income per capita, so it has enormous potential for retail market.

“Another factor driving the retail sector is the daily changes in consumer shopping preferences,” said Nguyen Khanh Toan, research manager at Savills Vietnam.

Ho Chi Minh City will also have more opportunity for growth as the country is committed to the World Trade Organization (WTO) to open its retail market this year.

“In 2015, Vietnam will have to accede to its WTO’s obligation to permit the opening of wholly foreign-owned retail businesses, which will generate the demand for retail space from foreign retailers entering the market in Vietnam,” said Duong Thuy Dung, deputy director and head of research and consulting services at CBRE Viet Nam.

However, CBRE pointed out that the Economic Needs Test was still a technical hindrance to trade. In the short term, the impact is not so enormous because foreign retailers have been involved in the market for a while, including Big C, Central Group, Metro Cash & Carry, Lotte Group, Aeon Group, CJ Group and so on.

CBRE also noted that the country’s retail and services turnover has always maintained an average growth rate above 10 per cent despite the economic downturn. Solid economic growth and a rising middle class population are expected to continue to drive this retail market in 2015.