Retail rents in Hanoi’s CBD inch up 1.1% in Q2

Thanks to foreign luxury brands’ resilience amidst the pandemic.

A recent report by JLL reveals that  rental rate in the City Centre increased 1.1% q-o-q to USD 62.8 per sqm per month, owing to the resilient performance and attention of many high-end foreign brands. Meanwhile, due to the pandemic’s lingering effects, the figure for the City Fringe remained constant at USD 28.6 sqm per month.

Here’s more from JLL:

The market yield slightly compressed further to 8.7% in the City Centre and 10.2% in the City Fringe, as the market was recovering and the outlook is expected to remain positive in the long term.

Demand shows slight recovery with the expansion of foreign brands

With the expansion of several foreign brands, the Hanoi retail market has seen a slight recovery. Jaguar Land Rover, a renowned premium automobile brand, opened its first experience studio in Trang Tien Plaza in 2Q21, while Korean fashion brand Hazzys expanded its store chain in Vincom Ba Trieu.

Most prime malls maintained an occupancy rate of more than 90%. However, with the stress of pandemic, new leases in the quarter were limited to small and medium-sized transactions; the majority of which occurred in the City Centre area. Meanwhile, the City Fringe area recorded negative net absorption since H:Connect returned its space in Vincom Nguyen Chi Thanh.

No new completions in 2Q21

The resurgence of COVID-19 and an extended social distancing period delayed the grand openings of several shopping malls. As a result, the Hanoi retail market remained quiet in 2Q21, with no new completions.

Thanks to the expansion of foreign brands, the vacancy rate in the City Centre decreased by 0.4% q-o-q in 2Q21. Despite the minimal increase in the q-o-q vacancy rate, vacancy in prime malls in the City Fringe has improved by 1.1% y-o-y, demonstrating the Hanoi retail market’s strong recovery since the first outbreak.

Outlook: Rents to hold flat in 2H21

Vincom Mega Mall Smart City is scheduled to complete in 3Q21, providing approximately 40,800 sqm to the City Fringe stock. Other non-prime mall opening dates have been continuously delayed due to the outbreak; and hence, they will continue to rely on the containment of the pandemic over the next six months.

The market expects a recovery in foot traffic in the next six months as Hanoi manages to keep COVID-19 case numbers relatively low. Hence, occupied space across malls is expected to be stable while rents are expected to hold flat until the pandemic is well contained.

Note: Hanoi Retail refers to Hanoi's overall prime retail market.