Ha Noi's Retail Property Market Maintains Optimistic Growth in Q3/2024

• In Q3/2024, Ha Noi’s retail real estate market experienced stable growth, with improvements in both supply and rental rates. The robust growth of the retail sector, tourism, and the evolving shopping habits of Vietnamese consumers drove this positive development. 

• Retail podiums performed well during Q3/2024, with a significant increase in leased space, while revenue-sharing models at major shopping centres continued to expand. 

Ha Noi's Retail Market Shows Positive Growth 

Total supply increased by 2% QoQ (quarter-on-quarter) and 2% YoY (year-on-year), with the addition of a new shopping centre (Diamond Park Plaza) and two retail podium projects. Over the past five years, the supply has grown at an average annual rate of 3%. 

According to Savills Q3/2024 Market Brief, shopping centres dominated with 63% of the total supply, equivalent to 1.14 million m2, while retail podiums accounted for 17%, and department stores made up 3% as of Q3/2024. 

Regarding occupancy, retail space remained stable QoQ, with a 1 percentage point (ppt) decline YoY, reaching 85%. Ground floor gross rent decreased slightly by 1% QoQ but increased by 6% YoY, largely due to improved rental rates in retail podiums, which saw a 2% QoQ rise and a 9% increase compared to the previous year. In central areas, the average rent was VND 3.4 million/m2/month. 

Trinh Huynh Mai, Associate Director of Commercial Leasing at Savills Ha Noi, shared: “Retail spaces in central areas, especially in Hoan Kiem District, consistently command high rental rates. Premium retail spaces in Hoan Kiem have a significant price gap compared to those outside the central area, even as those locations also see rising rents.” 

Currently, Ha Noi’s retail real estate market holds strong growth potential. This is mainly attributed to the positive expansion of the overall retail market. According to the General Statistics Office, total retail sales of goods and services at current prices in Q3/2024 were estimated at VND 1.6 trillion, up 1.7% compared to the previous quarter and 8.4% YoY. 

Additionally, Ha Noi’s tourism sector continued its strong growth in Q3/2024, with an 11.7% YoY increase in visitor numbers. In August alone, international arrivals were estimated at 373,000, an increase of 19.7% compared to the previous month and 43.4% YoY. In the first eight months of 2024, international visitors reached approximately 2.818 million, a 44% increase compared to last year. 

Matthew Powell, Director of Savills Ha Noi, commented: “The rapid recovery of international tourism, coupled with the ability to adapt to inflation adjustments, has driven a 6% YoY increase in rental rates and boosted customer traffic across the city.” 

Moreover, Viet Nam’s demographic advantage, with a large population and rising consumer demand among young people, supports the market. Vietnamese consumers are increasingly inclined to shop locally and trust domestic markets. “10-15 years ago, many high-end Vietnamese consumers preferred to purchase luxury goods during overseas trips. Today, they seek to experience and own premium products in Viet Nam. This creates a strong appeal for retailers looking to enter this growing market,” Matthew added. 

Looking ahead, the retail market is expected to show considerable growth potential with new supplies entering the market. From 2024 to 2026, the new supply will include 257,280 m2 from five shopping centres and nine retail podiums. Shopping centres will account for 71% of the supply, while retail podiums will comprise 29%. Major projects include Hinode City Mall, Ha Noi Centre (175 Nguyen Thai Hoc), and Starlake B1CC1 and B1CC2.

Retail Podiums Thrive as Shopping Malls Develop Revenue-Sharing Models

In terms of retail leasing, Mai shared: “In Q3/2024, retail podiums experienced strong performance, supported by demand both within the buildings and from their surrounding areas.” Retail podiums recorded a 13%-point increase in occupancy YoY. 

Take-up increased by 26,550 m2, with retail podiums contributing significantly with an additional 24,520 m2. New retail podium projects in Q3/2024 included BRG Diamond Residence and The Rosary, both featuring retail models anchored by tenants in supermarkets, entertainment, and F&B sectors. This model aims to meet residents' daily needs and entertainment activities, driven by the rapid population growth in surrounding areas. 

Meanwhile, shopping centres, especially international brands like Lotte, Central Retail, and AEON, maintained solid business performance. Mai highlighted a key trend: “The revenue-sharing lease model, previously exclusive to department stores like Lotte Centre Ha Noi and AEON Malls, is increasingly applied to suitable tenants in major shopping centres.” 

The revenue-sharing model in shopping centres offers the advantage of attracting more tenants through flexible rental rates, reducing financial risks for small businesses and new brands. At the same time, both mall owners and tenants share risks when revenue falls short of expectations, fostering collaboration to drive sales. However, the model has the drawback of unpredictable revenues, as it depends on tenant performance and requires an efficient revenue management system.