Retail Space in Central Areas: High Rent, Limited Availability

The retail real estate market in the central areas of Ho Chi Minh City is currently facing a severe shortage of supply, with occupancy rates nearing an absolute 100%, and new supply being noticeably insufficient. This has led to a continual increase in rental prices, driven by the high demand from large and prestigious brands, which far exceeds the supply capacity of these prime areas. These developments reflect the powerful attraction of the central area, where high-spending customer segments converge, offering a favorable business environment and significant potential for enhancing brand value.

According to reports from VnExpress, long-established shopping centers such as Saigon Center, Parkson Lê Thánh Tôn, Vincom, and Diamond Plaza are nearly fully leased. The remaining spaces are primarily smaller areas, underground levels, or high floors, which fail to meet the expansion or long-term operational needs of most enterprises. These limited spaces are unsuitable for effectively showcasing products and delivering a memorable shopping experience, particularly for high-end brands that require a space that embodies their style and values.

F&B brands and large coffee chain stores in Ho Chi Minh City also face considerable challenges in finding suitable commercial space in District 1's central area. A representative of a well-known coffee chain stated, "Currently, it is very difficult to find vacant commercial space in shopping centers located in prime areas. We need a spacious area to serve a large number of customers and create an aesthetically pleasing design space, but most ideal locations have already been occupied."

Reports from Avison Young Vietnam also confirm that retail podiums at major hotels in District 1, such as Rex Arcade, MPlaza Saigon, Times Square, and Terra Royal, all have 100% occupancy rates. This situation is not only limited to high-end shopping centers like Diamond Plaza, Saigon Center, and Vincom Center Đồng Khởi but also extends to neighboring areas. This reflects not only high but also stable rental demand in Ho Chi Minh City's central areas, with many businesses even willing to wait for an extended period to secure a position in these key locations.

David Jackson, General Director of Avison Young Vietnam, asserts that commercial centers in District 1's central area are always the top choice for many prestigious brands when entering the Ho Chi Minh City market. Competition for leasing space in these areas is exceedingly fierce, as such locations can significantly enhance brand image and value while attracting a large customer base with high purchasing power. Many major brands are even willing to wait a considerable amount of time to secure leasing positions in this area.

Vo Thi Phuong Mai, Head of Retail Services at CBRE Vietnam, also shares a similar view, stating that Ho Chi Minh City in general, and the Central Business District (CBD) in particular, suffer from an acute shortage of retail space supply. This situation is expected to persist in the foreseeable future due to the depletion of central land resources and the lack of new projects to replenish retail space supply. This scarcity not only poses significant challenges for businesses looking to expand but also drives rental prices higher, with gradual increases as leasing competition intensifies.

Although rental prices in the city center remain at a very high level, many large brands are still willing to patiently wait to secure their own commercial space in these prime locations. High-end brands in fashion, cosmetics, and dining chains are particularly eager to enter the central area to access high-spending clientele and elevate their market presence. However, since the market has reached a saturation point, rental prices are not expected to increase excessively, especially amid the challenges the retail sector faces, such as rising operating costs, decreasing consumer purchasing power, and competitive pressure from e-commerce.

In response to space constraints in the central areas, some businesses have begun shifting toward neighboring districts such as District 3, District 7, or even some suburban areas where there is a more abundant supply of commercial space at more reasonable rental prices. Many fashion, dining, and lifestyle brands have chosen to gradually expand to new projects in the peripheral regions. This not only helps them acquire more development space but also enhances the customer shopping experience. Today, customers are not just seeking products but are looking for a comprehensive shopping experience, including space, style, and service—something that current commercial centers in the city center are struggling to provide due to limited space and a lack of innovation.

Regarding future rental forecasts for retail real estate, Vo Thi Phuong Mai believes that rental prices may remain high due to the lack of significant improvement in supply and the strong demand from major brands. Nevertheless, considering market saturation and the challenges faced by the retail industry—such as operational costs, changing consumer behavior, and the rise of e-commerce—rental growth may not be overly significant. In this context, businesses need to seek cost optimization, improve customer service experience, and maintain flexibility in selecting commercial locations to continue driving growth.

The shortage of retail space in Ho Chi Minh City's central areas, coupled with high rental costs, not only poses a major challenge for brands but also creates opportunities for development in neighboring and suburban areas. Given the limited land resources in the city center and the inability to expand, developing new areas may be an effective solution to meet growing demand and open new development paths for the retail market in Ho Chi Minh City in the future.