Hanoi city centre retail rents to grow 4% this year

But rents in the city fringe could increase by 9.5%.

According to a JLL report, the decentralisation trend in Hanoi’s retail market will be demonstrated with two new completions in the City Fringe, including the Lotte Mall Tay Ho with 80,000 sqm (NLA) in 3Q23 and The LINC Park City in Ha Dong with 10,600 sqm (NLA) in 4Q23. 

These two new Prime malls will serve residents in the new neighbouring urban areas.

Here’s more from JLL:

Rent in the City Centre is expected to continue its healthy growth momentum of 4.0% y-o-y. Meanwhile, with the high-quality development of Lotte Mall Hanoi, rents are expected to increase sharply, by 9.5% y-o-y, in City Fringe. Capital values in the City Centre and the City Fringe should grow by 10.9% y-o-y and 15.6% y-o-y, respectively, as yields continue to compress further.

Despite healthy demand, net absorption is slowing q-o-q

Healthy demand remained in Hanoi’s retail market with positive net absorption over the past four quarters, but has slowed q-o-q owing to economic uncertainties. In 1Q23, the market recorded a net absorption of 382 sqm in the City Centre, up by 78.5% y-o-y but down by 74.2% q-o-q, while in the City Fringe, net absorption was 2,381 sqm NLA, down by 26.7% q-o-q.

International retailers and F&B brands led demand with new leasing activity in high-traffic Prime malls, while local businesses cut lease sizes with the closure of many underperforming outlets. Children’s playgrounds was the main demand driver, whereas furniture, bedding and electronics (phones and phone accessories) saw contraction in leasing demand due to the growing use of online platforms.

Renovations and improving customer experiences are trending

No new Prime supply was recorded in the quarter.

Renovations and customer experience improvement are trends among shopping malls, especially long-standing malls, to compete with the growing online base. For instance, Indochina Plaza Hanoi’s renovation is now in its finishing stage. Vincom Center Tran Duy Hung and Vincom Center Pham Ngoc Thach have also installed new rest areas for shoppers and a play zone instead of kiosks.

Healthy demand supports a slight increase in effective rent

Net effective rent was at USD 63.7 per sqm, per month, remaining stable q-o-q and increasing 1.4% y-o-y due to positive demand, as there was limited vacant space in existing Prime malls in the City Centre. Likewise, the net effective rent in the City Fringe also kept up the steady growth trend, increasing slightly by 0.2% q-o-q and 2.5% y-o-y, to USD 29.4 per sqm, per month.

Capital values increased slightly in both the City Centre and City Fringe by 1.6% q-o-q, thanks to a strong market foundation supporting the long-term positive outlook of Hanoi’s retail market. The overall market yield continued to compress in the quarter, yet at a slower rate amid market headwinds, to 7.87% in the City Centre and 9.37% in the City Fringe.

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