A stable economy is having a positive effect on consumer confidence and this together with lower oil prices and interest rates should cause spending to improve this year, Richard Leech, Executive Director of CBRE Vietnam, has forecast.

He said lower oil prices result in lower transport costs and thus lower prices of goods.

Retail sales and services last year were worth around 140 billion USD, but growth had slowed significantly over the last few years, according to the Retail Market Update report CBRE released.

The update reviews the past 12 months and forecasts trends for 2015.

Supply of retail space has grown in both the major markets of Hanoi and Ho Chi Minh City and will continue to grow in 2015. By the end of the year it is expected that Hanoi will have approximately 900,000sq.m of retail space and HCM City, 600,000sq.m.

In terms of the number of projects and square metres in the pipeline, Hanoi and HCM City stack up well against its regional neighbours, with Hanoi in 7th position. Most other cities ahead of Hanoi are in China.

HCM City is expected to have at least five new projects in 2015 – two being developed by SSG, a megamall by Vingroup and the eagerly awaited Vivo City due to open in District 7 in April 2015.

Apart from having more supply of formal retail space than HCM City, Hanoi has lower rents and higher vacancies.

HCM City rentals have remained stable at approximately 100 USD per square meter in the central business districts (CBDs) and about 40 USD per square metre in non-CBD locations. HCM City's vacancies are at less than 8 percent compared with more than 20 percent in Hanoi.

New supply that came on line in 2014 was dominated by Lotte in the north and by Aeon in the south. Both these retail giants, respectively from the Republic of Korea and Japan, opened multiple locations in Vietnam and will continue to expand in 2015.

Leech noted that HCM City's first metro line, which is currently under construction, would link together several shopping centres in the CBDs and District 2.

"With the completion of The One, Sai Gon Centre Phase 2 and the Tax Plaza in District 1, HCM City shoppers can anticipate a shopping district on a par with Sukhumvit Road in Bangkok or the famous Orchard Road in Singapore."

The development of new shopping centres has resulted in an influx of new tenants to Vietnam. In 2014 Hanoi saw 27 new brands come to new developments such as the refurbished Trang Tien Plaza and the Royal City Megamall in Thanh Xuan district. New brands on the HCM City retail scene in 2014 included Robins Department Store, Lalique and Marks and Spencers.

Apart from the aggressive expansion plans by foreign and local retailers in Vietnam in 2015, one of the most noticeable trends is ‘affordability'. The emergence of new bazaars containing hundreds of small kiosks, rent-free shopping malls such as Hoa Binh Green City, and low price supermarkets are all reinforcing the trend that consumers demand better value for money.

Food and beverage outlets were the standout sector in 2014 and will continue to dominate the high streets.

CBRE said that nearly 50 percent of its enquiries for retail space were in this sector and that the enquiries were more likely to be for fast casual dining rather than high-end dining.

"The F&B sector is leading the charge in terms of occupying ‘unconventional' retail space, and grouping together in specific nodes such as West Lake in Hanoi and Crescent Lake in HCM City" Leech explained.

Competition for a share of the consumers' wallet is fierce while consumers are now more sophisticated and knowledgeable and place value on an overall retail experience when shopping, Leech explained.

Shopping centre managers will need to have a good understanding of what their customers want, leverage the data they can collect from smart phone applications and digital marketing, provide more and better quality entertainment facilities and collaborate more with retailers, CBRE said.-VNA