See How Retail Premises Must Adapt to Improve Occupancy

According to the General Statistics Office (GSO) of Viet Nam, in the first two months of 2023, retail sales of goods and services improved and are catching up to pre-Covid levels.

Viet Nam is now a crucial market for leading international brands. Asian fashion, cosmetics and sportswear brands are expanding. Demand for retail space is expanding throughout Viet Nam. Interestingly, demand is not limited to a singular type. Brands are looking at premises across shophouses, retail podiums, and shopping malls such as Lotte Center Hanoi. 

According to Savills Viet Nam Market Report , retail stock in Ha Noi in Q4/2022 reached 1.7 million sq m, which was stable quarter-on-quarter (QoQ) and increased by 4% year-on-year (YoY). In 2022, take-up reached 63,200 m², increasing by 364% YoY. In 2023, an additional 212,400 sq m will come from 15 new projects.

With healthy supply prospects, retail premises in Ha Noi are set to accommodate the requirements of brands looking to enter and expand. This expansion is positive following the demure performance during the pandemic.

According to Hoang Nguyet Minh, Senior Director, Commercial Leasing, Savills Ha Noi, after Covid, securing capital has been a struggle for several retailers. Mass store openings are less prevalent and brands are more selective when securing properties, focusing on prime locations and profit generation. Rather than just focusing on a “prime” location, brands need to consider parking, accessibility, proximity to main roads, traffic influence, and if shippers can park and pick up goods. Priority is given to densely populated areas, with multiple access points, convenient parking, and access for mobile shippers like Grab drivers and taxis.

Shophouses or retail podiums in apartment buildings still have vacancies despite demand from fashion, sports goods, supermarkets, restaurants, food and beverage, or cosmetics tenants.

Minh pointed out three main reasons for these difficulties.

“The first is the strict firefighting regulations for retail properties. As there have been tragic accidents recently, firefighting regulations have become more stringent. Given the recent changes to the regulations, building owners and landlords must ensure buildings meet or are upgraded to meet the requirements. Tenants cannot obtain the correct operational licences if they are in properties that do not meet the requirements. This means they are having to examine properties more carefully, while slows leasing because buildings do not receive the firefighting certificates until they are completed.

Secondly, retail podiums that are leased to individual tenants will struggle to secure large brands. Therefore, they must have a strategy to build a professional tenant portfolio, which includes the implementation of advertising and marketing strategies.

The third reason is the legal factor. Retail premises must be approved for retail or commercial service functions rather than converted from other functions. This is significant because tenants cannot obtain the correct approval if their properties do not meet retail requirements.”

To remain competitive, Minh suggested that retail owners and landlords must ensure their properties meet the legal, functional, and firefighting requirements.

Several shopping mall developers are renovating outdated properties to remain competitive. Shopping malls and retail podiums such as Indochina Plaza and The West at 265 Cau Giay (Cau Giay District) are being renovated.

“Many shopping malls have succeeded in attracting tenants, some even have tenants on waiting lists. Tenants tend to prioritise premises in well-organised and standardised shopping malls to ensure footfall and business performance, rather than choosing shophouses with management, operational, and parking limitations.” Minh shared.

Conclusion

Savills Retail has a team of professionals who can assist you in finding the perfect retail space, no matter where you are in Viet Nam. For further details, please contact Ms Hoang Nguyet Minh.