Pay for space everywhere
With just over 2 months left until the end of 2023, the rental real estate segment in Ho Chi Minh City is still struggling to deal with investors and tenants returning their premises.
In central districts such as District 1, District 3, District 5... or suburban districts such as Binh Thanh, Go Vap, Phu Nhuan... there are cases of vacant rental premises with signs posted for months but no tenants.
"Wave" of returning rental premises appears everywhere.
On the streets in the central districts of District 1 such as Hai Ba Trung, Nguyen Trai, Nguyen Thi Minh Khai, Dong Khoi... retail space for rent, street-front houses are full of signs and phone numbers for rent.
In areas such as Binh Thanh, Go Vap, Phu Nhuan districts, the situation of returning premises is also happening, on some streets such as Quang Trung, Nguyen Kiem, Nguyen Oanh (Go Vap); D5, Phan Dang Luu, Le Quang Dinh, Phan Van Tri (Binh Thanh)...
According to research, the rental real estate market is assessed to have decreased sharply after being heavily affected by the Covid-19 pandemic. Shopping malls, rental floors or shophouses are all facing investors and tenants returning their premises.
Vacant premises painted on the outside, lots of phone numbers for rent but all are brokers.
The “wave” of returning rented premises has been simmering for a long time, especially in the past year, the market economy has been severely affected, the service and tourism industries have declined… people have tightened their spending, causing many businesses to close and return their premises.
Mr. Nguyen Nhat Nam (Binh Thanh resident), who used to sell clothes on Hai Ba Trung Street, District 1, Ho Chi Minh City, said: "I was forced to return the premises from the beginning of February 2023 because there was no profit. Besides, the rent was not reduced, so I was forced to return the premises to find a new place to do business."
According to Mr. Nam, many of his friends also paid for the premises to switch to online business or operate in other fields. Limiting the need to spend too much money on renting premises.
Talking to Nguoi Dua Tin , the owner of a rental space in District 3 said: “For more than a year now, I have left more than 200 square meters of floor space vacant, even though I have asked brokers many times to find tenants. However, the price is not good, so I have not found a suitable partner yet.”
High rent, owner refuses to lower
In a recent report, Cushman & Wakefield also pointed out that Dong Khoi Street (District 1, Ho Chi Minh City) is among the most expensive streets in the world to rent premises. The rental price here is equivalent to 350 USD/m2/month. This figure increased by 17% over the same period and increased by 40% compared to before the Covid-19 pandemic.
According to a report by CBRE Vietnam, rental prices in this central area are still increasing by 1 - 1.5% per year. This shows that the rental prices offered by mall owners or retail space owners compared to demand are still high and have not shown signs of cooling down.
District 1 is the central area and the rental price is very high. However, this is also the district where many businesses are paying for retail space.
PV contacted a few phone numbers posted in front of the premises to find out about the prices. Specifically, a 1,000m2 floor space located at the intersection of Hai Ba Trung - Nguyen Dinh Chieu, District 1, is being offered for rent at 420 million/month (according to research, the above premises have been vacant for nearly a year).
Also on Hai Ba Trung Street, but located in Dakao Ward, with a 3-storey premises, 450m2 of floor area is being offered for rent at 170 million/month. When asked if there was a further discount, the rental unit quoted the best price and did not lower it.
Although the “wave” of returning rented premises is appearing in many places in Ho Chi Minh City, especially in the central areas. However, it can be seen that finding tenants for premises is contrary to the rental price. The rental price is still considered expensive, but the owners still insist on not reducing it.
Rents are still very high, forcing tenants to wait for the economic recovery.
“Even though the premises have been vacant for a while, it is still difficult for us to reduce the rent, because when we bought the house, the premises…we were already living at a very high price, while the prices of everything are increasing, so we are forced to keep the rent, or if we reduce it, it will only be a small reduction, not a deep reduction. If we lower the price, it will be very difficult to change if the market develops again, because everything is shown in the contract,” said a tenant.
Assessing the current rental market, Mr. Nguyen Hong Hai, Chairman of VNO Vietnam said: "In general, the rental market has encountered many difficulties recently, especially retail premises. The service industry has been heavily affected, with low revenue and high costs, so many people tend to return the premises, hold out or quickly withdraw to avoid losses."
Regarding the fact that the landlord did not lower the rent, Mr. Hai commented: “Each economic period is different, this is clearly shown at the present time. I think, landlords and tenants need to have a more positive outlook, supporting each other during difficult times. Instead of leaving the premises empty, we can support tenants and reduce the rent to the maximum level. This will both retain tenants and generate funds instead of the landlord leaving the premises empty for many months.”
According to experts, the current retail space, even though it is the end of the year, will certainly still face many difficulties. People are spending more tightly, the service industry, tourism, etc. are affected. With less demand, the "wave" of returning space will continue.
Landlords need to reorient demand, reduce rental costs and consider mutual benefits. As the economy improves, this segment will continue to bring high profits.
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