Article

HCMC Retail Market 2Q21

Landlord offered rental concessions for 1-month social distance

July 02, 2021
New supply continues to push back the opening plan

All HCMC's retail centres have to shut down in June 2021 due to the social distance policy. Despite completing construction, some shopping centres have delayed their scheduled openings until the end of this year.

Limit leased transactions

The fourth outbreak in the final month of 2Q21, coupled with strict social distance policies, has limited new retail lease transactions. Therefore, the vacancy rate in the City Central and City Fringe areas has remained relatively stable at 2.9% and 4.1%, respectively [2].

While most landlords have yet to announce their tenant structure plans due to the uncertainty of the pandemic, tenants are also adopting a “wait-and-see” strategy. The market's bright spot in 2Q21 is the opening of a 3,000-square-meter Decathlon – a French sporting goods retailer – at Vincom Megamall Thao Dien in April end.

Landlord offered rental concessions for 1-month social distance

Similar to the first outbreak situation in 2Q20, most landlords offered rental concessions such as rent discount or rent deferment, during the period of social distancing in June. As a result, the actual average rental rate of key shopping malls fell by 8.3% q-o-q, at USD70.4/sqm/month in the CBD and USD 31.7/sqm/month in the City Centre and City Fringe, respectively. 

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Outlook: Market to face downward pressure

The outlook for the HCMC retail market is heavily reliant on the results of the pandemic control. Mall openings are only meaningful if it is accompanied by a strong footfall, which is an expected result of the pandemic's complete containment. Otherwise, malls' challenges will persist.

Domestic brands continue struggling amid the linger pandemic situation due to financial pressure, while revenue depends mainly on domestic demand. Meanwhile, foreign brands, although they can continue with a long-term strategy, will limit or delay expansion plans in the short term. This will lead to a delay in the opening plans of new retail centres in 2021, including Socar Mall and other neighbourhood shopping centres in the podium of mixed projects if they can not meet required occupancy rates.

For existing shopping centres, some landlords are planning to restructure the tenant/ floor plan to create a new face for the malls when reopening. Meanwhile, with regard to Covid-19, if the pandemic is not effectively contained, actual rent is expected to remain stable or decrease, as rental concessions may continue to support tenants.

Note:

  1. Prime rents refer to average net effective rent of Prime Mall across the city, excluding VAT and service charges. Please refer to terminology for definition of Prime Malls
  2. City Centre refers to District 1. City Fringe refers to the rest of the city.

Source: JLL Research

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