17:23 (GMT +7) - Tuesday 12/12/2017

Business

C&W: Retail space in demand despite soaring e-commerce

Released at: 08:56, 08/12/2017

C&W: Retail space in demand despite soaring e-commerce

Photo: Viet Tuan (VET)

Latest C&W report notes steady demand for CBD retail space.

by Hong Nhung

Vietnam’s retail market is maturing and will add around 400,000 sq m of retail space around the country in 2018 and double the stock by 2020, reaching 4 million sq m, according to Cushman & Wakefield’s “Main Streets Across the World” report.

Food and beverages (F&B), fashion, and wellbeing / healthcare are the main sectors predicted to continue to see the strongest growth. Vingroup, Vietnam’s largest developer, has become a major retailer, having marked another milestone in expanding its shopping center network to 44 locations in 23 cities and provinces in the country.

“In the next ten years, a new high-income class will appear,” said Ms. Mai Vo, Head of Retail Services at Cushman & Wakefield Vietnam. “According to the Ministry of Foreign Affairs, this class is currently only 1 per cent of the total population but will account for at least 10 per cent in 2020. This new class is expected to be the driving force behind the growth of luxury goods such as motor cars and high-end apartments and villas.”

Retailer demand for CBD space is expected to remain high. Shop-house property rentals are seen as overrented in central areas due to competition among brands wanting to mark their territory and as a result have pushed rents to an unsustainable level given actual sales. CBD areas in Ho Chi Minh City and Hanoi have almost doubled and C&W cautions that a bubble may be forming.

E-commerce will see a strong rise in Vietnam during the years to come after the relatively nascent industry posted impressive revenue of almost $4 billion this year, which is expected to reach $10 billion by 2020. “We will continue to see an emerging e-commerce segment driven by favorable demographics, but this does not necessarily result in lower demand in shopping centers,” Ms. Mai said. “We have seen new trends in the US, with actual inventory being held by retailers being higher, and this is a strong signal that footprints are falling.”

E-commerce platforms are also aggressively expanding into bricks and mortar stores with real success. “We have seen, and likely will continue to see, some challenges for department stores, and without serious repositioning will highlight a warning in this segment about the direct impact of improved e-commerce infrastructure and offerings to consumers,” she added.

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