Deserted shopping malls turned into office buildings

After the Miniso brand returned the premise it rented at Thao Dien Pearl Building in HCMC’s Thu Duc City, the shopping mall there was converted into an office building offering relatively affordable rents compared to Grade B office space.

The monthly rent is US$22-24 per square meter, and the service fee is $6 per square meter.

Meanwhile, the average rent of Grade B office space in HCMC in the second quarter of this year stood at $26.11 per square meter per month, according to real estate consultancy JLL.

According to real estate consultancy Savills Vietnam, like Thao Dien Pearl, some buildings with an area of below 10,000 square meters in HCMC’s outskirts have recently changed from modern retail space into co-working space or office buildings.

Giang Huynh, associate director and head of Research & S22M Platform at Savills Vietnam, said the trend is growing because small shopping malls often find it hard to lure and keep tenants.

Most of these projects are in new residential areas far from the city center with business models encapsulated in a few services such as F&B, convenience stores, and hair care. Tenants there often cannot afford high rents.

Most of these models are not financially efficient for investors, so the buildings’ owners "tend to convert their functions to be more commercially efficient," she said.

However, the shift to office buildings may not be a panacea.

Although the office-for-rent market was relatively stable in the first half of this year, the occupancy rate decreased slightly in the B segment to 79%, according to real estate consultancy Coillers.

According to Savills Vietnam, in the first half of the year, 10 Grade B and C office buildings in HCMC’s former District 2 (now part of Thu Duc City) stopped leasing due to mediocre performance, or for internal use.

The situation of modern retail space in HCMC was stable in terms of both supply and demand in the first half of the year, with the total floor supply being more than 1.5 million square meters, and the occupancy rate remaining at 91%, according to Savills Vietnam.

The biggest problem of the retail space market is the scarcity of quality premises, said Tran Pham Phuong Quyen, retail leasing manager at Savills Ho Chi Minh City.