HCMC retail sites in short supply, no ceiling seen on development

31 Jul

Unlike the office leasing market, now quiet because of low demand, the leasing market for upscale store sites in Ho Chi Minh City has remained bouyant even in the economic downturn, reports the Saigon Economic Times.

Urban consumers always ready to spend money

Like their counterparts in the in big urban areas of other countries, Vietnamese consumers shop more and more at high grade shopping centres, the domain of products with international brand names.

According to an executive of Savills Vietnam, a real estate service broker, the tendency can be seen more clearly in markets like where young people account for a large fraction of the population — like in Vietnam. In a special report on the Vietnamese real estate market, Savills pointed out that at the lowest point of the global crisis, the fourth quarter of 2008, Vietnamese consumers hardly broke stride. They continued to seek out internationally known products and to go shopping at modern trade centres, like their counterparts in developed countries.

Sales of Louis Vuitton brand fashion products on the day its shop at Ho Chi Minh City’s Opera View building opened two years ago reached $750,000.

A senior manager of the Him Lam Real Estate Corporation said his corporation will begin construction of a high grade trade centre in HCMC’s District 7, calling it the ‘model of modern shopping for people with money.’ Meanwhile, CB Richard Ellis (CBRE), another real estate broker, also forecasts big, sustained potential for sales of ‘flashy and expensive’ goods in Vietnam’s retail market.

Products with international brand names continue to be offered – and sold – at prices higher than in other countries. The manager in charge of leasing retail premises at Saigon’s newly renovated Eden Mall confirms that most buyers of deluxe products are Vietnamese consumers, not tourists or foreigners.

Marketers of brand name fashion products, who study the consumption habits of wealthy urbanites, hunt relentlessly for beautiful, empty retail premises in big cities. In HCMC, there’s a growing shortage of such sites.

The T-junction

Many Vietnamese real estate developers share the Savills executive’s view that domestic retailing should be developed to the point that Vietnamese shoppers are not tempted to go abroad to spend their money in places like Thailand or Singapore.

In HCM City, a number of trade centres are under constructin, including Kumho Asiana Plaza and the Vincom project. The Saigon Paragon shopping centre opened its doors to customers late in June.

Savills predicts that HCM City will have 1.1 million more square metres of high standard retail premises in the next four years. CBRE’s estimate is that 1.35 million square metres of new retail premises will be ready by that time. Fifty percent, it notes, are already under construction.

Some analysts believe that the massive investment in retail premises will push down leasing fees that have gone sky high. However, real estate developers show no worry about that.

The Him Lam manager said that if the area of retail premises is compared with the number of people able to buy, it’s evident that the ratios are still very low in HCM City and in Hanoi as well. The Eden Mall exec believes that leasing fees for well-sited premises can only increase.

Observers have put forward three scenarios for the retail stores real estate market for the next several years.

In the first scenario, Vietnam opens the retail market’s doors widely to wholly percent foreign-owned retailers. In this case, domestic retailers can obtain international experience in management and brand name development from foreign retailers. This will help domestic retailers improve their technology and business efficiency, while setting up new standards for services and products on the market.

In the second scenario, there continue to be restrictions on foreign retailers, i.e., limits on opening new retail branches, which will incline them to become consultants or managers for domestic retailers.

An executive of the firm that owns Hung Vuong Plaza Trade Centre said that the second scenario will benefit domestic traders and domestic projects. She believes that in this case, many Vietnamese investors will seek relationships with foreign investors.

In the third scenario, it is posited that Vietnamese investors will occupy all advantageous retail positions, supported by a closed-door policy vis-à-vis foreign retailers. The Him Lam Company executive doubted the third scenario would happen. If it did, he said, it would be a catastrophe, preventing the upgrading of the domestic retailing industry that is needed in the context of Vietnam’s deeper integration into the world.

Source: TBKTSG

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