Many brands enter the market
According to analysis by the Commercial Leasing Department - Savills Hanoi, the Vietnamese market in general and Hanoi in particular, is becoming an ideal destination for international brands, from fast fashion to luxury and high-end retail segments.
Ms. Hoang Nguyet Minh, Senior Director, Commercial Leasing, Savills Hanoi said: "Since the post-COVID-19 period, Vietnam has emerged as a potential market with strong appeal. The increase in domestic consumption is considered one of the factors driving the growing interest of international brands in this market".
Another important factor that makes Vietnam’s retail market attractive is the limited presence of international brands, especially when compared to neighboring markets such as Singapore, Thailand or Indonesia. This creates a great opportunity for brands looking to expand their market, especially when they are looking to make their first steps here.
The lack of international brands is an advantage of the Vietnamese retail market.
In particular, Hanoi is attracting attention as a hot spot for retail development thanks to its rapid urbanization, large population, high population density, increasing number of middle-income households and a large working-age population. These strong fundamental factors have created huge retail demand for the capital market.
The market also recorded a more vibrant high-end retail segment with expansion activities and new store openings. High-end brands used a one-store strategy in prime locations.
In Hanoi, the Hoan Kiem area, especially on Ngo Quyen, Ly Thai To and Trang Tien streets, has continuously welcomed the appearance and expansion of high-end and luxury brands from 2021 to present, such as: Louis Vuitton, Dior, Berluti, Tiffany & Co., Maje, Longchamp or most recently Piaget, Watches of Switzerland...
One of the reasons why the market attracts famous brands is that the number of super-rich people in Vietnam has doubled and the number of rich people has increased by 70% in the past 5 years, and is expected to continue to skyrocket in the next 5 years. In addition, the sales prospects of luxury brands in Vietnam also contribute to creating momentum for continued expansion and attracting new brands to the Vietnamese market.
Ms. Hoang Nguyet Minh, Senior Director, Commercial Leasing, Savills Hanoi.
However, the current difficulty for retail brands, especially high-end retail, is the supply of premises. Currently, the supply that meets the requirements of high-end brands in Hanoi is only 3,500m2 of floor space. Meanwhile, the demand for expansion and new openings of high-end brands in Vietnam is increasing. The lack of supply leads to price competition and pushes up the rental price of premises on Trang Tien axis, an area not on the walking street.
“The Trang Tien area in Hanoi is currently divided into two groups. The first group, in the area where luxury brands such as Louis Vuitton and Dior are concentrated, and the streets are not pedestrian streets, have high rental prices, the same as the rental prices in Dong Khoi Street in Ho Chi Minh City. The second group is in the pedestrian street area, with rental prices only 1/3, or even 1/4 of the first group,” Ms. Minh analyzed.
Premises in shopping malls have many advantages
According to Savills experts, domestic and foreign retailers are moving into shopping malls. With the advantage of being developed more systematically than renting small townhouses, shopping malls are doing better and better in building a tenant list, upgrading services, utilities, and a clear legal corridor to support retail customers. At the same time, the old quarter, which is concentrated with many townhouses and small businesses, will have difficulty finding tenants to fill the gap during this period.
However, there are still some significant challenges as the number of shopping malls in Hanoi is still not enough to meet the needs of international brands. Therefore, the emergence of new shopping malls in the future will be a decisive factor, not only creating space for new brands but also promoting competition and diversification in the retail market.
Shopping malls are dominating other types of retail space.
Commenting on the retail market in 2024, Ms. Minh said: "The retail market in 2024 and 2025 will become more and more vibrant, as Vietnam is being evaluated as a key market in Southeast Asia for international retailers to expand their operations, leading to large market demand."
In addition, the market will also welcome new high-quality supply for the shopping mall segment in Hanoi in the next 3 years. Meanwhile, the townhouse and retail podium segments of apartment buildings will face difficulties in leasing, and rental prices will hardly increase according to the general price level of shopping malls due to the specific characteristics of scale, services, and tenants of each project.
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