Apartment buildings in Hanoi - Illustrative image. (Photo: VNA) Hanoi (VNS/VNA) - The COVID-19 pandemic caused retail revenueto drop sharply in 2020, impacting the domestic retail property market,according to Savills Vietnam.
However, the market anticipates a revival of the retail sector in thefourth quarter (Q4) of this year and into the first quarter of 2021 due to theimportant year-end festivals and Tet (Lunar New Year) holiday.
In the third quarter of 2020, retail sales of goods and services (RSGS)eased 0.1 percent year-on-year, after a Q2 pandemic induced drop of 12 percent year-on-year.
To September 2020, total RSGS fell to 40 billion USD, or 2 percent year-on-year. However, retailsales of goods alone were up 10 percent year-on-year while food and beverage (F&B) sales were down39 percent year-on-year.
With limited new central business district (CBD) supply over the shortterm due to the pandemic, new market entrants will be challenged. However,there is a wave of redevelopment underway in suburban street shops and largermixed-use developments.
For instance, stock in Q3 was 1.5 million sq.m in HCM City and theaverage occupancy of 94 percent was down 2 percentage points year-on-year. Thepandemic caused some retailers, mostly in non-CBD areas, to end theirleases or relocate.
Rents have remained stable year-on-year, as landlords with fully occupied space werereluctant to adjust rents or offer short term incentives. In some cases,monthly service fees were cut by 2 USD, or 30 percent rental discounts for afew months were offered to new tenants.
Street sales hardest hit
Shopping centre occupancy of 95 percent has remained high as leases tendto operate within a more structured framework and occupiers prefer to retaintheir space. Malls with a more rounded offering of shopping, entertainment anddining saw better footfall, Savills Vietnam said.
“For prime street retail landlords, the debilitating effects of COVID-19were immediate. With most tenants being small to medium enterprises, they weremore affected by sudden revenue loss than larger-scale retailers,” saidTroy Griffiths, Deputy Managing Director of Savills Vietnam.
“The pandemic has forced the major street retail chain tenants to altertheir business strategies. Many F&B and fashion chains closedunderperforming outlets which led to further vacancies. Tourism focused streetretail in the CBD was hit hardest by travel bans adding to existing metrorelated disruptions.”
“Since early February, many street retailers have not renewed theirleases. Those wanting to retain prime locations after the pandemic are eithertemporarily closed or seeking rent reductions. A recent Savills survey foundtenants sought up to 40 percent discounts compared to the maximum 20 percentoffered,” Griffiths said.
E-commerce boom
In addition, the pandemic has seen e-commerce opportunities increase,after forcing shoppers and retailers into behavioural change. Classic retailershave used technology to improve performance and enhance service, he said.
Greater focus on websites, e-commerce platforms and increased mobile anddigital marketing are all refined outreach strategies. Customers familiar withonline shopping have an increased variety of cost-based promotions supported byrapid door-to-door delivery.
A recent Google Temasek Report anticipated 43 percent year-on-year local segmentgrowth from 2018 to 15 billion USD in 2025 supported by 66 percent of thepopulation being regular internet users and 72 percent having smartphones.
As e-commerce has increased, so have delivery services, especiallyF&B, with innovative owners ramping up delivery options. Supermarkets suchas Co.opmart and Vinmart have expanded home delivery services, according toSavills.
This rapid growth has further influenced consumer behaviours. Nielsenresearch from July found, post-pandemic, 64 percent of respondents will continueusing delivery services while 63 percent will increase their online shopping.
A survey of leading e-commerce websites including Shopee, Tiki,Lazada and Sendo showed visitor growth is accelerating.
In 2021, more than 80 percent of new retail supply will be innon-CBD areas. As consumers face the loss of income and increased uncertainty,developers are delaying launches. Those who are moving ahead may struggle withoverseas brands suspending market entry and established businesses slowingexpansion plans, according to Savills.
A Savills survey in Q3/2020 revealed many F&B and fashion tenantshave either closed or reduced leased areas. This downsizing trend is likely tocontinue into the mid-term.
A combination of early containment, improved financial governance,Government support mechanisms, and global stimulus programmes have raisedexpectations of recovery in Vietnam. According to the most recent ADB report, Vietnamwith 6.8 percent forecast for 2021 will have the highest GDP growth in Asia.
“Lower rental costs are likely to invigorate the industry while classicretailers will need to further innovate strategies to stay relevant,” saidGriffiths.
“The ‘social’ sectors most affected by the outbreak such as F&B,gyms and cinemas should recover faster from the crisis as consumers will bequick to embrace ‘normality’ after months of social isolation. Sectors with astronger online presence such as fashion may see a slower return considering theshift in consumer behaviour to online sales," he said./.
VNA
