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According to property consulting company CBRE, vacancies intensified in both central business district (CBD) and non-CBD projects, following large tenants’ moving out, while consumer spending was still focused on basic necessities.
The average CBD vacancy rate went up by approximately five percentage points over the last quarter. Non-CBD vacancy slightly increased to 16.8 per cent, up one percentage point over the last quarter, which was mainly due to Indochina Plaza Hanoi’s recent opening.
Hanoi has also seen more shop closures than openings. The tenants’ consolidation trend which occurred in the past few quarters continued in the third quarter. Out of 169 tenant movements, 48 per cent of shops closed, while 39 per cent of shops opened.
Consumers remain more conservative with their spending as retail sales growth rate in the first nine months grew just 10.2 per cent year-on-year after inflation. Garment and textiles saw the most new openings, but also the most closures. There have been no new openings in electronics industry as seen in the first half of the year.
Categories such as food and beverages and entertainment, on the other hand, seemed to fare relatively well and acted as traffic drivers to shopping centres. However, having these features in-house doesn’t necessarily encourage consumers to spend more.
Lare Boss shop manager, in Grand Plaza Department Store, Dinh Dieu Linh said: “My shop was opened two years ago. However, now the shop has few customers. In the first eight months of 2012, its business goes through a slump”.
The low number of customers in modern trading centres is mostly caused by budget conscious customers, impacted by the economic downturn. Bui Lan Huong, a bank employee on a healthy salary, even pointed to costly products.
Huong said Indochina Plaza as well as other shopping centres such as the Garden Mall, Pico Mall and Parkson were not only abundant, but also more expensive than supermarkets or street shops.
“I want to buy fashion eyeglasses, but its price is too expensive, the lowest price VND3 million ($143),” said Huong, when seeing products at Italy Eye Wear Capital brand shop in Indochina Plaza Hanoi.
Having seen failure at other modern retail centres recently, Indochina Land has decided to direct its Indochina Plaza Hanoi under the level of “affordable social hub,” instead of luxury trading centre.
With the location in a new commercial hub of the west Hanoi with very high population, IPH was designed to attract a very broad ranging of customers, from students to high income earners, instead of focusing mostly on luxury brands as many other trading centres. The centre recently had an occupancy rate of around 80 per cent, while the rest is expected to be leased up to the end of this year.
Despite the poor performance of operational shopping malls, developers are still moving ahead with construction, leading to huge supply of retail space in the coming years. Last week Vingroup, one of biggest real estate developers in Vietnam, started leasing campaign its Vincom Mega Mall Royal City, which is the largest mall in Vietnam so far with space totalling of more than 230,000 square metres. In August this year, Indochina Land - a property arm of Indochina Capital - also opened leasing for its 18,000sqm Indochina Plaza Hanoi.
Melinh Plaza in Ha Dong district is also leasing 54,000sqm. According to CBRE, nearly 650,000sqm of retail space is expected to enter the market from now till the end of 2013, putting larger pressure on existing projects.
CBRE sees that newer projects, especially those in fringe areas, are expected to experience a rather difficult time in the first two or three years, due to fiercer competition and limited consumer spending that might linger on in the near term.