Rental charges of retail space in HCM City decline sharply

The rental charges of retail space in HCM City have dropped sharply following the decline of purchasing power. The downward momentum has not stopped yet when the supply is forecast to continue to increase.

The rental charges of retail space are falling strongly. With a hire of from 3-6 months, the tenants can negotiate a discount of 20 percent against the rental charges in early this year and long-term renting tenants (above three years) can get a discount of over 30%, according to Toai, a real estate broker.

Rental charges are falling up to 50%.

Vietnam Fashion Co has recently signed dozens of contracts to rent new retail space with an area for each store from 600-1,000 m2. Of which, with a quite nice position on Hai Ba Trung Street, district 1, HCM City, the company has reached a discount of up to 50 percent against the rental charge in Q1/2012. At another large shop also in the centre of HCM City that had rental charge of $12,000 per month previously, the company reached a long term rent agreement with rental charge of only $6,000 per month.

Viet Tien Co has recently also opened additional three shops at trade centres. Dinh Tien Nga, who is in charge of business division, said that the rental charge has discounted 20 percent from the end of 2011.

Some trade centres and office buildings for lease in HCM City’s district 1 set aside six floors of retail space for lease. Eighteen months after the inauguration, nearly half of the area remains empty, so the owner decided to reduce the rental charge from $78-120 per m2 per month to $64-110/m2/month.

Zen Plaza trade centre has also reduced the rental charge by 15-20%.

Real estate experts and brokers as well as some retailers said that the rental charges will decrease further due to the current supply is abundant while the demand continues to fall.

According to surveys of CBRE Vietnam, the signs of increase in supply from finished projects and high empty space can make the rental charges of retail space in shopping centres in HCM City continue to decline during the last months of 2012. Meanwhile, according to Savills Vietnam, the rental charges of retail space along the routes are equal to only 30-40 percent of the asking rent in trade centres in the downtown area.

Colliers International Vietnam’s statistics show that the average rental charges at trade centres in the first quarter this year reached about $70.6/m2/month (excluding service charges and VAT), down about 4 percent over the same period last year.

According to the supplier of property services, Savills Vietnam, rental charge of retail space in Vietnam is now about $65/m2, depending on the areas. The highest rental charges are in the city’s downtown locations such as the Caravelle, New World, Opera View, Rex Arcade and Sheraton Saigon, with about $110/m2/month. Key tenants in these areas are the well-known international brands like Gucci, Ralph Lauren, Burberry or Louis Vuitton. - Vietbiz24