Retail Real Estate Segment: Examining the Dynamics from an Academic Development Perspective

In recent years, the retail real estate segment in Ho Chi Minh City and across Vietnam has witnessed significant growth, with the participation of many large-scale investors. These developments reflect a dynamic and efficient market, where the operational capacity of major shopping centers reaches high levels, playing an important role in consolidating the urban economy. Simultaneously, the retail real estate market also contributes to the restructuring of urban areas, as shopping centers become key highlights of rapidly urbanizing regions, thereby creating a sustainable commercial and service ecosystem.

According to statistics from Savills Vietnam, in two key markets, Ho Chi Minh City and Hanoi, the leased retail space has reached 1.5 million square meters in each city. The occupancy rate has consistently remained above 90% for many years, demonstrating the enduring appeal of large-scale shopping centers. This growth not only affirms the position of retail real estate as an important investment segment but also reflects the strong demand for high-quality retail space among Vietnamese consumers. Retailers are not only focused on expanding leased space but also on optimizing the shopping experience through space design and the application of modern technology, thereby enhancing operational efficiency.

Currently, shopping centers with a scale of over 100,000 square meters are attracting significant interest from major names such as Vincom, Aeon Mall, Central Retail, and potentially Central Pattana in the future. This indicates the potential for expansion of the retail market in Vietnam, where large shopping centers serve as the nucleus for urban and commercial development. These shopping centers are not only places that supply goods but have also become destinations for entertainment, culture, and community, thereby creating added value for surrounding areas, improving the quality of life for residents, and contributing to comprehensive regional development.

Strategic Advantages of Domestic and International Investors

According to Mrs. Tu Thi Hong An, Senior Director of Commercial Leasing Services at Savills Vietnam, domestic investors have significant advantages in terms of a deep understanding of consumer habits and access to land reserves. The available land funds allow domestic investors to develop large-scale retail projects at strategic locations, thereby ensuring long-term presence and wide coverage. Meanwhile, international investors such as Aeon and Central Retail have deep expertise and strong brands on a regional and global scale. They bring international standards in the design and management of shopping centers to the Vietnamese market, thereby elevating service quality standards and customer experience.

In the retail sector, reputation and long-standing experience play a crucial role in the effective development and operation of shopping centers. International investors, with experience managing many successful shopping center chains worldwide, can apply modern management methods, optimize operations, and increase value for both tenants and customers. This not only gives international investors a competitive edge but also creates positive pressure for domestic investors to enhance their management capabilities and service standards.

Mrs. An also emphasized that consistency in development strategy, marketing strategy, and leasing strategy is a determining factor for the long-term success of a shopping center. This consistency creates a competitive advantage, allowing shopping center chains to create and maintain differentiation compared to standalone projects that lack scale or systematic vision. Large shopping center chains with systematic management models can create a loyal customer ecosystem, adding value not only in commercial terms but also in social and community aspects.

Drivers of the Retail Market and Trends in Rental Growth

According to CBRE Vietnam's real estate market report for the first half of 2024, consumer demand is being strongly supported by several favorable factors, including low-interest rates, improved economic growth, and a reduction in VAT from 10% to 8% until the end of the year. These factors have provided significant momentum for the retail real estate market, particularly in major urban centers like Hanoi and Ho Chi Minh City. These positive macroeconomic factors not only boost consumption but also help retailers and real estate investors increase access to capital, expand operations, and sustain growth.

The limited supply in the central areas of Ho Chi Minh City and Hanoi has contributed to a significant increase in rental prices. In Ho Chi Minh City, central rental prices have reached nearly USD 280 per square meter per month, an increase of 18.5% compared to the previous year. The vacancy rate in the central area is only 4.6%, while in non-central areas it is 7.1%. Notably, rental prices have been on the rise since last year, reflecting the scarcity of high-quality retail space. Strong demand from both international and domestic retail brands has created considerable pressure on supply, especially in central areas with prime locations and developed infrastructure.

Shopping centers in Ho Chi Minh City are also undergoing renovations and restructuring of tenant models to enhance attractiveness and meet the changing needs of modern consumers. These changes go beyond expanding space for new brands; they also improve consumer experience by adding entertainment, dining, and cultural activities. CBRE Vietnam's forecast indicates that rental growth rates in 2024 will continue to remain high, particularly in central areas with growth rates of 17-18%, and in non-central areas at 8-9%. These figures indicate the sustainability of the growth trend in the retail market, especially in the context of favorable macroeconomic factors and state policy support.

The retail market is also witnessing a shift of some retailers from central areas to suburban areas and second-tier districts. This reflects a new development trend, where suburban areas are beginning to become new destinations for retail investors due to lower rental costs and population growth potential. These areas not only provide additional space for retailers but also help alleviate pressure on central areas while redistributing business activities more evenly and reasonably.

Sustainable Development Strategies for Retail Real Estate

The retail real estate market in Vietnam currently offers many attractive investment opportunities. However, to ensure sustainable development and maintain competitiveness, developers need to focus on building long-term strategies, emphasizing consistency in marketing and leasing strategies. Consistency not only helps maintain a competitive position but also ensures operational stability and increases the value of shopping centers, particularly in a market that is experiencing many fluctuations and continuous changes like today.

Additionally, developers need to focus on innovation and diversification of services to meet the changing needs of modern consumers. Shopping centers are no longer merely shopping venues but have become community spaces where residents can engage in cultural, entertainment, and social activities. Therefore, sustainable development strategies should include elements such as environmental protection, the development of green spaces, and the promotion of community cultural activities. Only by thoroughly considering these factors can shopping centers achieve sustainable growth and attract long-term support from the local community.

The retail real estate market in Vietnam is in a phase of growth with significant potential but also challenges. To succeed, developers and investors must keep up with changing trends, continuously improve service quality, and optimize consumer experiences. Only then can the retail real estate segment maintain its attractiveness and continue to grow strongly in the future.