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|Amid the aftermath of the first COVID-19 waves, many prestigious rental spaces had to be abandoned, Photo Le Toan|
Minh Trang, selling fashion accessories on Hang Ngang street in Hanoi for nearly four years, did not expect having to close or return the store because of sluggish trade. She said she had to outbid many others to rent the store and even agreed to a premium price and longer contractual term for the nice, spacious spot on one of the most crowded and expensive streets in the capital.
“I pay more than VND60 million ($2,600) a month. The landlord has agreed to reduce the rent by 30 per cent for the past few months but with customers growing thin again, I cannot afford it, so I have to return the store and find a new location,” said Trang.
Trang’s story is one of thousands across big cities like Hanoi and Ho Chi Minh City, which are known for high rents for business premises, especially stores on main streets.
Now, however, charges are falling sharply as more and more businesses are forced to give up their leases.
More than three months after social distancing, the busiest streets of Hanoi still have not regained their bubbling energy and crowds of before. Rolling with the impact of the COVID-19 pandemic, many shops in Hanoi’s Old Quarter on Hang Gai, Hang Bong, Hang Ngang, Hang Bac, Hang Ma, and Luong Van Can streets are standing bereft of customers and vital revenue. Many store keepers were forced to take off signs while others temporarily pulled down their curtains or put up the premises for lease.
“Renting a shop in Hanoi’s Old Quarter has never been so easy because so many units have been returned to the owners. They cannot afford to stay, so they return the store and accept bankruptcy,” said Tien, a landlord at a Hang Gai street house.
Tien has also given an exemption on rent for a month and then reduced it from VND50 million ($2,170) to VND40 million ($1,740) for his 20m stall on Hang Gai street, but it has been nearly two months and nobody has contacted him to lease it out.
According to the price table of land types in Hanoi, Hoan Kiem district has been dubbed “more expensive than gold” with the highest land price of nearly VND188 million ($8,170) per square metre. This district includes the Old Quarter, the ancient streets of which are home to a plethora of thriving businesses and services, including entertainment and tourism, especially for foreign tourists. Business premises there are always expensive yet tremendously attractive to tenants, with owners rarely having to put out signs advertising a property for rent or transfer.
However, the passing of COVID-19 caused 390 businesses and 1,155 households doing business and sidewalk trading in the district to stop operations, according to Hoan Kiem Tax Department. While a number of stores have closed and properties have been up for lease for several months now, there is a significant number of home-based stores still operating here, as they need not worry about rental costs.
In Ho Chi Minh City, many of the most popular shopping streets for fashion accessories, shoes, and comsetics like Nguyen Trai, Nguyen Dinh Chieu, Dien Bien Phu, and Le Van Sy in District 1, District 3, Phu Nhuan, and Binh Thanh (with rents from a few thousand to tens of thousands of dollars) are now empty.
The owner of a clothing store on Nguyen Trai street said: “I am advertising to transfer the shop, including a two-storey front house and the whole interior worth more than VND500 million ($21,740), just redone before Lunar New Year. My rent is $3,500 per month (VND80.5 million), and the landlord has given a discount of VND60 million ($2,600) per month. The deposit is $10,500. I am looking to get half of this amount back but have yet to find a replacement.”
Following the general trend, on the once-vibrant streets near Phu My Hung tenants are now also returning properties en masse. Roads with expensive premises that have once been the apple of investors’ eyes such as Tran Hung Dao and Nguyen Thi Minh Khai streets are now also starting to sport leaflets and notice boards advertising premises for sale or rent.
According to a survey conducted by VIR, to forestall the increasing wave of premises being returned, landlords have been reducing rents and loosening lease terms or payment conditions. Many landlords are now more flexible in renting out smaller areas instead of whole units and are offering discounts until the end of 2020.
A report by Savills Vietnam confirmed that many businesses have had to close because of declining custom. This has led to a more common return on street stocks, mainly from small business units which are unable to be sustained long-term. Therefore, potential tenants tend to look for discounts of up to 40 per cent.
According to a CBRE Vietnam survey, the price of retail space in Ho Chi Minh City and Hanoi has decreased 10-20 per cent. Currently, rental periods are shorter, reduced to 2-3 years instead of five years as before.
In addition, many companies and individuals have chosen to downscale or return premises in beautiful and expensive locations, and switch to renting locations in small streets to save money. Others have decided to switch to online business entirely.
Hung, the owner of a jewellery shop on Hanoi’s Hang Bac street, said that he will take his business online to reduce rental costs. “The pandemic is complicated and I have to save on rent and employees,” said Hung.