Solve the ground problem

In 2022, many localities have just emerged from 2 years of the pandemic, consumer demand is booming, and low rental prices have encouraged many individuals and businesses to start doing business. However, in 2023, the world and domestic economies are facing difficulties, people are tightening their spending, while owners of rental premises are preparing to increase prices again, making buying and selling activities gloomy. The wave of returning premises has spread from expensive streets in the center of Ho Chi Minh City to many other busy streets.

Closed because of unaffordable premises

According to a survey by a reporter from the Nguoi Lao Dong Newspaper on November 23, retail stores and restaurants on many busy streets in Ho Chi Minh City are quite deserted. A series of storefronts with prime locations on Le Lai, Le Loi, Le Thanh Ton (District 1), Cach Mang Thang Tam (District 3)... are closed, the outside is shabby, and full of information about renting premises.

A series of vacant rental premises on Le Thanh Ton Street, District 1, Ho Chi Minh City. Photo: LE TINH

Ms. Tra My, a saleswoman at a souvenir shop on Le Loi Street (District 1), said that since the beginning of the year, although there have been more foreign tourists visiting Ho Chi Minh City, the rate of purchases is very low.

"Tourists are no longer as generous with their souvenir purchases as before. Most only buy small items worth around 5-10 USD, and they are less interested in higher priced products, even if there are promotions. Shop owners also thought about doing business online, but it was not effective due to the specificity of the products," said Ms. Tra My.

On Le Thanh Ton Street (District 1), Ms. Xuan Huong, owner of a noodle shop, complained that she could only sell from 7:30 to 9:00 and from 6:00 to 7:00 all day, with only a few customers left.

Due to the sluggish situation, she decided to register to sell online on applications such as Grab, Baemin..., although the profit is small, it also helps increase the restaurant's income. "Many business people do not have enough money to pay for the premises, so they have to close after only a few months of opening" - Ms. Huong said.

Since the beginning of the year, it has been noted that more and more rental space in the central area of ​​Ho Chi Minh City has been left vacant, proportional to the fact that many large and small brands in the fields of food and beverage (F&B), fashion, footwear, beauty... have also quietly withdrawn from the market.

Mellower Coffee in the Notre Dame Cathedral area, Saigon La Poste Cafe next to the City Post Office, PhinDeli, Saigon Case, and Gio Bac around the Turtle Lake roundabout have been closed for months now. The Chuk Tea & Coffee chain has also closed some ineffective stores, focusing on stores with good revenue and online sales.

According to the survey results of F&B enterprises in September 2023 by Vietnam Report, from 2022 to 2023, up to 33.3% of enterprises in this industry will have reduced revenue, 41.7% of enterprises will have reduced profits. According to data from market research firm Nielsen IQ, about 84% of the fast-moving consumer goods (FMCG) industry has increased prices in the first 8 months of this year, causing the industry's revenue to continuously decrease.

Mr. Dzung Nguyen, Senior Director of Retail Measurement at Nielsen IQ, commented that most products have seen a decrease in consumption in the first 8 months of this year. Of the 26,214 brands in Vietnam monitored by this market research company, up to 60% are on the decline due to increasing prices and losing output.

Brand expert Vo Van Quang said that the sharp decline in purchasing power, the "hot" development of e-commerce has caused the majority of consumers to choose to shop online instead of going directly to stores, and the oversupply crisis in some areas has caused many stores to no longer be effective and forced them to close.

Need more discount

Ms. Le Thi Ngoc Thuy, Chairwoman of the Board of Directors of Vina International Joint Stock Company (owner of the Viva Star Coffee and Viva Reserve chains), said that rental costs account for a large proportion of the total operating costs of F&B businesses. For coffee shop models, rental costs account for about 20%-25% of total costs.

Currently, many premises have reduced prices by about 20% - 30% compared to 2022, but the economy is still difficult, the overall consumption of the whole market is slow, so businesses aim to cut costs, ensure profits at each point of sale and consider carefully in renting premises and expanding operations.

According to analysts, due to economic difficulties, revenue at stores has decreased while businesses have to spend more on promotions, discounts and other incentives, causing profit margins at stores to decrease compared to before.

"Instead of investing in prime locations and spending most of the profits to pay for the premises, businesses choose to withdraw, shift to areas far from the center or invest in online sales," said Mr. Tran Le Nguyen, CEO of Kido Group Corporation.

Dr. Ho Minh Son, Director of the International Media Market Research Institute, pointed out that in reality, rental premises in Ho Chi Minh City are often transferred through many owners, so the rental price to the final customer is very high. The cost of premises accounts for a large proportion of the total business cost, so low-priced premises are always prioritized. According to this expert, the wave of withdrawal from the central area will continue to increase in the coming time.

Mr. Nguyen Tat Thinh, founder of Housezy Joint Stock Company, said that there are still many rental premises in central districts of Ho Chi Minh City with very high prices because tenants calculate rental prices from the profit ratio on the value of a premises or the price of the area.

"They accept leaving the property vacant rather than reducing the price because further reduction will affect the general level and future rental prices. However, there are still some landlords who agree to reduce the price if the tenant has goodwill and plans to do business long-term," said Mr. Thinh.

According to Mr. Ta Trung Kien, Deputy General Director of Wowhome Investment and Development Joint Stock Company, the most important factor in deciding whether or not to rent a premises is the price. "Just reduce the rental price by 50% within 6 months from the date of signing the contract, not including the time for repairs, decoration and other policies, customers will feel secure and decide to rent immediately" - Mr. Kien suggested.

(To be continued)

(*) See Lao Dong Newspaper from issue dated November 23

Mr. Son, who owns several rental properties in Thu Duc City, said that most of the premises are vacant in the area mainly because tenants negotiate prices that are too low, while requiring long-term contracts.

“I also want to rent out so I have reduced the price by 10%-15% compared to the beginning of last year, but customers still ask for a further 10% reduction. I have linked up with some brokers to rent out. As long as there are customers who are willing, know the market price, and want to do business long-term, I will accept the reduction and rent out immediately,” Mr. Son shared.

Source: https://nld.com.vn/kinh-te/keo-suc-mua-dip-cuoi-nam-giai-bai-toan-mat-bang-20231123204436932.htm