With retail spaces finding it hard to attract tenants, landlords are banking on foreign investors expanding chains – PHOTO: THANH TAO

HCMC - As a result of the ongoing Covid-19 pandemic, the rental market in HCMC has plummeted, pushing many landlords into difficulties as tenants have left, leaving empty spaces in their wake and no takers.

Since the beginning of the year, the supply of rental spaces has grown slowly under the impact of the Covid-19 pandemic, along with the closing down of stores.

In order to attract tenants, many landlords have offered discounts of up to 50%, but have been met with little or no response.

Many landlords said that no matter how much of a discount they offer, no one is interested in renting as very few dare to open up a business at this time.

Expert analysis at Savills shows that due to the pandemic’s impact, retail space has recorded no new supply in the first quarter and remains at 1.5 million square meters, unchanged from the last quarter.

The slow progression of future supply of rental place is evident as in out of 11 completed projects with 159,000 m2, only three are expected to be put into operation in 2021. This is due to stores shutting down as a result of the impact of Covid-19.

Meanwhile, the capacity of commercial areas continues to decline. By the end of the first quarter, the average capacity was at 93%, down 1 percentage point by quarter and 2 points by year. Shopping malls in outer areas also witnessed a decrease of 1 point by quarter.

Tu Thi Hong An, commercial leasing director at Savills Vietnam, assessed that the effects of Covid-19 have seriously hindered the real estate market, especially retail units. Many businesses had to shut down, return property or shrink their business.

The retail segment in HCMC is receiving a lot of foreign investment, documenting new openings by a number of chain brands pertaining to the food, fashion and accessories industries. This shows that international brands still see potential in Vietnam’s market.

In early March, Uniqlo opened its fourth store, with a width of over 2,000 square meters at Van Hanh Mall (District 10) and Decathlon has also opened its second store at Thao Dien Mega Mall (Thu Duc City).

Moreover, international brands ranging from middle to high-end such as Balenciaga and Tiffany & Co are also planning on entering the Vietnamese market.

The expert emphasized that total retail sales will increase when more e-commerce and international brands enter Vietnam’s market. However, food industries and non-CBD areas are still facing many difficulties.

“The expanding wave of foreign brands is giving hope to the retail industry. At shopping centers, the trend of tenants mainly pertaining to fashion and accessories will continue in the coming period in non-CBD areas. In addition, the food industry and convenience stores are expected to continue expanding toward development in densely populated areas,” said An.

Many real estate experts believe that it will take a while for the market to recover its momentum.

As such, both businesses and landlords have been forced to find coping measures, such as re-evaluating the retail market and finding new business opportunities.

Expired contracts see difficulties finding new customers

In the context of retail operations encountering difficulties in non-CBD areas, landlords have actively sought out ways to support tenants such as rent-free incentives throughout the construction phase or offering discounts of up to 40% within the first 2-3 months for new transactions.