Retail space is operating strongly at high capacity
According to Savills' Q3/2024 market report, retail space in Ho Chi Minh City has increased supply with a total leasable area of 1.6 million m2, up 3% quarter-on-quarter and 5% year-on-year after three new projects opened with a total leasable area of over 50,900 m2 in the non-CBD area. Of which, District 8 leads the supply with two projects, Parc Mall and Co.opmart Pham The Hien, while Vincom Plaza 3/2 in District 10 reopens after renovation.
In addition, the performance of this type of business remained very strong, with occupancy maintained at a high level of 94%, up 0.5 percentage points quarter-on-quarter and 4 percentage points year-on-year. Major tenants such as Mr. DIY, Uniqlo and Muji expanded in non-CBD areas due to affordable rents and high population density.
"The performance is good with expanding brand chains and strong demand from key tenant groups," said Ms. Cao Thi Thanh Huong, Senior Manager of Research Department, Savills HCMC.
In terms of operating capacity, key projects such as Hung Vuong Plaza, AEON Mall and Van Hanh Mall always maintain 100% occupancy thanks to high traffic volume, diverse tenants and effective management. The average ground floor rental price is VND 1.4 million/m2/month, up 4% quarter-on-quarter and 6% year-on-year.
Many retail spaces are still operating at 100% capacity.
The consumption of this type is also very positive, reaching 42,111 m2 of floor space. The F&B industry leads with 25% market share, followed by entertainment with 24% and fashion with 18%. This signal is also recorded along with the development of the retail industry in the city.
Specifically, in the first 8 months of 2024, retail sales of goods and services in Ho Chi Minh City reached VND765 trillion, up 10% year-on-year. According to the Ho Chi Minh City Department of Industry and Trade, retail sales of goods and services are estimated to increase by 11% year-on-year in 2024. Consumer spending is expected to increase by 7.6%.
Assessing the prospects of this type in the coming time, Savills believes that the market's performance is expected to remain good due to limited new supply, combined with strong consumption. In the fourth quarter of 2024, more than 27,600 m2 of floor space from three non-CBD projects will open with an expected capacity of at least 80%.
By 2027, the future supply will be more than 163,100 m2 from 12 projects; of which, the non-CBD area accounts for 55% of the supply. To improve capacity, some investors such as Cantavil Premier and Platinum Plaza are planning to renovate and refresh the tenant mix by 2025.
Office market faces supply challenges
According to the report, the HCMC office market will not see any new Grade A projects entering the market. Total supply saw a modest 1% increase QoQ, reaching 2.8 million sqm of net lettable area (NLA) from 392 projects, up 7% YoY. The growth was mainly driven by six new Grade B and C projects, adding 39,800 sqm of NLA.
Meanwhile, in the Grade B segment, there were two new projects, Thaisquare The Merit (District 1) and CMC Tower B (District 7), accounting for 60% of the new supply. Four smaller Grade C projects, each with an area of 3,000 to 5,000 sqm NLA, were mainly located in the non-CBD area. Notably, Binh Chanh welcomed its first office building, LN Hub Building, providing over 3,300 sqm NLA.
Regarding the supply gap, Ms. Giang Huynh, Director of Research & S22M, Savills HCMC commented: "Although future supply is expected to increase in the high-end segments, the annual absorption rate shows that the market will remain balanced."
Grade A offices are facing supply challenges
In terms of occupancy, the office market decreased by 1 percentage point (ppt) QoQ and YoY to 88%, mainly due to low occupancy at newly-launched Grade B and C projects. Grade A projects in District 2 and District 7 performed well during the quarter, with occupancy increasing by 5 ppts QoQ and 23 ppts YoY to 89%. These projects attracted tenants thanks to competitive rents.
Average rents remained stable QoQ but increased 6% YoY to VND812,000/m2/month, reflecting a balance between supply and demand. Non-CBD Grade A rents increased 1% QoQ, while CBD Grade A rents decreased 1%.
According to Savills’ survey of leasing transactions in Q3/2024, the majority (73%) of transactions were aimed at relocating to better quality buildings. The Finance, Banking, Insurance and Real Estate (FIRE) sector led with 39% of transactions, followed by ICT with 31% and manufacturing with 13%. A large proportion (75%) of tenants were foreign companies, mainly from the US, Korea and Japan, while domestic companies accounted for only 25%.
Assessing the prospects of this type, the research unit forecasts that new supply will be limited in the last quarter of 2024, with only 6,691 m2 NLA from two Grade C projects. By 2027, an additional 196,412 m2 NLA from 15 projects will be operational. Meanwhile, green certification is a concern for high-end office projects in Ho Chi Minh City, as 63% of the upcoming Grade A and B supply will focus on meeting these standards.
Hotel school awaits peak season
According to Savills, in Q3/2024, the hotel sector recorded no projects and one 4-star hotel closed, causing supply to decrease by 1% QoQ. However, supply increased by 5% YoY to 16,443 rooms from 115 hotels due to the reopening of nine 3- and 4-star projects after renovations and three new 4- and 5-star projects in the first 9 months of the year.
International brands are developing well with the participation of Hilton Saigon in Q1/2024 providing 228 five-star rooms and then investor Mappletree changing the brand of InterContinental Asiana Saigon hotel to JW Marriott Hotel & Suites Saigon this quarter.
In terms of growth potential, with the development of the tourism industry, the hotel industry has recorded good signs in recent times.
Specifically, in the first 9 months of 2024, Ho Chi Minh City tourism has improved significantly year-on-year with the number of international visitors reaching more than 4 million (up 12% year-on-year) and domestic visitors reaching nearly 27.4 million (up 1% year-on-year). This has boosted hotel performance as the average room rate increased by 2% year-on-year to VND2 million/room/night and the occupancy rate remained stable year-on-year at 62% despite the supply growing by 5% year-on-year.
Many international brands have entered the Ho Chi Minh City hotel market and have had good development.
In Q3/2024 alone, despite being the low season, the market still recorded an increase in occupancy of 1 percentage point QoQ and 3 percentage points YoY to 61% thanks to a 16% increase in domestic visitors and a stable international visitor flow. Average room rates increased by 4% QoQ and 3% YoY as all segments increased prices as the market prepares to enter the peak season from September.
"Despite being the low season, the third quarter of 2024 performance has improved compared to the previous quarter. With a promising outlook for the peak season in the coming quarter, Ho Chi Minh City is on track to achieve its 2024 visitor arrival target," said Neil MacGregor, General Director, Savills Vietnam.
However, when looking at the development prospects, Savills commented that future supply in Ho Chi Minh City is quite scarce with only three new projects expected to enter the market by 2027. All projects are located in District 1 and are expected to be managed by international brands. In the fourth quarter of 2024, Hotel Indigo Saigon The City is expected to be the only new project to open with 150 five-star rooms.
Source: https://www.congluan.vn/tp-hcm-mat-bang-ban-le-van-phong-ghi-nhan-tin-hieu-tich-cuc-trong-quy-iii-2024-post315192.html
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