Retail Market Recovers

10:12:26 AM | 5/17/2022

Vietnam's retail market is gradually recovering with goods being abundant, and demand tending to increase, promising a positive outlook in the retail real estate segment in big cities.

Post-COVID-19 recovery

As the COVID-19 pandemic has been basically controlled, activities in the tourism sector are gradually restored (fully reopening tourism from March 15, 2022); many programs connecting supply, demand and trade have been organized; production and business activities are also gradually recovering.

In April, Vietnam's total retail sales increased by 12.1% over the same period in 2021. This is a positive result compared to a decrease of 3.8% in 2021 due to the impact of the pandemic. In the first four months of 2022, the total retail sales of goods and service revenue had a remarkable growth compared to the same period last year, reaching VND1,777.4 trillion, up 6.5% over the same period.

In particular, the sales of cereal and food items increased by 13.2% due to rising commodity prices; accommodation and meals increased by 5.2%; tourism increased by 10.5%. In contrast, the group of garments and household appliances, tools and equipment decreased by 3.5% and 4.6%, respectively, because people's incomes were still low after a prolonged period of the pandemic.

The prices of these products were pushed in the domestic market due to the demand to produce goods for consumption and export together with the high petrol and oil prices, the complicated movement of raw material prices on the world market and its high price level. Due to the influence of the upward price trend on the world market, the prices of some domestic commodities such as fertilizers, animal feeds and raw materials, and construction steel increased in comparison to the previous month.

Although the prices of some goods tended to increase, the overall price level in the first four months of the year was basically well controlled, ensuring an abundant supply of essential consumer goods, cereals and foods, meeting the needs of people.

It is forecast that domestic demand will recover and increase gradually because Vietnam has achieved a relatively high vaccination rate, ensuring that consumers can participate in the safer shopping market; the reopening of tourism will stimulate shopping and consumption; the outlook for domestic consumption will be brighter due to the recovery of production, the return of workers, and increased income.

Demand for retail space increases

According to the Vietnam Association of Realtors (VARS), along with the recovery of the retail market after the pandemic, the rental prices of retail real estate, especially in commercial centers, are expected to markedly increase, especially in big cities.

According to a report by the Ministry of Construction, the occupancy rate of business premises at large commercial centers and supermarkets increased slightly compared to the first quarter of 2022 and continued to remain at a high level of about 90-95% when many incentive policies were offered by investors to attract businesses to return to rent the premises.

As for the retail space of townhouses, business stores have gradually reopened, and the status of business shutdowns and transfers of stores is no longer as common as in previous quarters. The average market rental price of commercial premises in the first quarter of 2022 increased slightly compared to the fourth quarter of 2021, but remained at a low level compared to the period before the COVID-19 pandemic.

According to VARS, the rental rate of the first floor in the first quarter of 2022 increased by about 5% compared to the previous quarter with stable occupancy. Ho Chi Minh City witnessed a similar trend with large tenants driving market demand.

Savills also forecasts that, along with positive economic recovery signals, many big tenants and foreign tenants will enter the market. Many new international brands such as Columbia, Arabica and 6ixty8ight will open stores in Vietnam. Specifically, Ho Chi Minh City and Hanoi are still favored destinations for new tenants.

Many large domestic and foreign retailers (such as MM Mega Market, AEON Mall, Central Retail, Saigon Co.op, Winmart, and The Gioi Di Dong) are implementing plans to expand the market and increase the size of their stores compared to the end of 2021, thereby increasing the demand for business premises.

According to experts, now is a "golden time" to create many opportunities for the retail real estate sector, which can satisfy the needs of consumers' experiences, the thing that e-commerce and other forms of online shopping cannot meet. It is forecast that famous retail brands in the world will quickly grasp the market when the rental price just starts to increase slightly in order to choose good premises for a long-term strategy in the Vietnamese market.

By Huong Ly, Vietnam Business Forum