Shopping malls lure tenants as street-front houses remain unoccupied

Several reports by commercial real estate market units have shown the occupancy rate of rental space in Ho Chi Minh City’s shopping malls reached over 90% in the first quarter, and most tenants are foreign brands.

In some cases, several commercial centers even achieved occupancy rates of up to 95-100%. Their surveys do not include a small number of commercial towers that are currently closed for renovations.

Cushman & Wakefield said the average rental price of the city's commercial center space in the first quarter increased by 7.1% over the same period last year while the occupancy rate stayed at over 90%.

A high-class commercial center on Nguyen Hue pedestrian street has found tenants for all of its stores on the first floor even though the rent is as high as US$300-500 per sq.m per month.

Similarly, CBRE Vietnam’s report shows that in the first quarter of the year, shopping malls in HCMC recorded an occupancy rate of 94%, with most leasing out stores on the ground floor at $224 per sq.m per month.

Colliers Vietnam said rent at HCMC’s shopping malls in the first quarter increased by 3% on average compared to the same period last year.

It said new tenants were mostly international brands, including Uniqlo, Muji, Haidilao and Arabica, which are increasing their presence in Vietnam with rapid expansion.

For street-front houses the picture is different.

A tour of downtown streets including Ngo Duc Ke, Ho Tung Mau, Nguyen Trai and Bui Vien provides clear evidence of how street-front houses are in need of tenants.

The rent of these premises has increased by 15-20% against the pandemic period in 2020-2021. In some cases, the rise is 5-7% and owners still cannot find tenants.

Tourists walk past a front house put up for lease on Ly Tu Trong Street in District 1, HCMC, March 2, 2023. The house is covered by leaflets of other landlords who are looking for tenants. Photo by VnExpress/Thanh Tung

Trang Bui, executive director of Cushman & Wakefield Vietnam, said there was a big difference between retail space in shopping centers and traditional street-front houses as they served different groups of tenants, resulting in different business strategies and budgets.

She said that international retailers were still more interested in shopping malls, which integrate many services and facilities and attract a lot of visitors.

During the first quarter, many Asian brands from Japan, Thailand, and South Korea chose to rent space inside shopping malls as they need interaction with customers to serve their brand strategies.

Trang Minh Ha, chairman of consultant firm North Stars Asia, said shopping malls usually attracted tenants who were international or famous Vietnamese brands that wants to boost their recognition.

Those customers have their long-term business strategy and stable sources for rental budget, he said.

Meanwhile, those who usually rent street-front houses are domestic businesses of small and medium scale.

They have shorter business plans and less funds for rent. Their purpose is to sell as much as possible, as opposed to working on branding.