Fashion and lifestyle brands drive Ho Chi Minh City’s retail leasing demand

Total net absorption was at 610 sqm in Q3.

Ho Chi Minh City’s Thiso Mall has experienced strong and consistent growth in new leasing transactions in the quarter. 

According to JLL, notable new leases included Hidden Castle Golf Club, which leased 1,324 sqm, Glamourista with 925 sqm, and Adidas with 296 sqm. The leasing demand from tenants in the Fashion and Lifestyle sectors has increased notably.

Here’s more from JLL:

Limited vacant space in Prime Malls in City Centre restricted new lease transactions. Meanwhile, Prime Malls in the City Fringe have maintained stable new net absorption, but with fewer large transactions compared to the previous quarter. Net absorption has been primarily driven by new malls like Thiso Mall. Overall, total net absorption for the entire market was modest, standing at 610 sqm.

Stable leasing demand lowers vacancy rates in the City Fringe

In 3Q23, no new supply was added. The total supply across both the City Centre and City Fringe stayed at 576,900 sqm. The renovation of Hung Vuong Plaza has been progressing according to schedule, with a planned launch in 4Q23, while Vincom Mega Mall Grand Park is expected to open in the first half of 2024. Both malls have been actively engaged in pre-leasing activities in the market.

The vacancy rate in the City Centre remained at 1.2% in 3Q23, with the additional 300 sqm of vacant space attributed to underperforming tenants who cancelled their leases at Vincom Centre B. On the other hand, the City Fringe recorded a reduced vacancy rate, to 3.8%, driven by stable leasing demand, which decreased by 0.2% q-o-q and 4.1% y-o-y.

Average rents uptick marginally

In City Centre, the net effective rent for Prime Malls experienced a marginal uptick, reaching USD 82.7 per sqm, per month, representing a 0.1% increase q-o-q. Despite consumer caution in luxury spending due to economic uncertainties, these premium premises in the City Centre continued to attract major brands seeking high-visibility spaces for brand promotion and marketing.

In City Fringe, net effective rent remained stable at USD 36 per sqm, per month, showing no significant fluctuations compared to the previous quarter. Property developers have been diligently working to optimise both occupancy rates and foot traffic. This is evidenced by their consistent rent pricing and strategic replacement of underperforming retail spaces with more promising brands.

Outlook: Prime Malls continue to maintain strong performance

Net absorption is expected to continue its growth in Prime Malls located in the City Fringe, especially in the new malls due to open in the next 12 months. It is estimated that nearly 50,000 sqm of leasable space could be absorbed, as indicated by the favourable pre-leasing rates currently being recorded.

The F&B, fashion and lifestyle sectors are expected to remain the primary drivers of new leasing demand. The consistent tenant base and steady visitor footfall in Prime Malls are expected to contribute to the ongoing growth of net effective rent. As a result, both submarkets are poised for nuanced increases in capital values, potentially up to 8%–10% y-o-y.

Note: Ho Chi Minh City Retail refers to Ho Chi Minh City's overall prime retail market.