E-commerce hits shopping centres but boosts office market in Vietnam

Despite heavy advertising to attract tenants, many commercial centres have still found it hard to attract brick-and-mortar stores. As a result, some shopping centres are being used for office space rather than retail establishments.
Some real estate specialists say the shopping centre slowdown is due to the e-commerce boom.
Ph?m Hung Thang, a lecturer at the HCM City University of Finance and Marketing, told Dau tu chuong khoan (Securities Investment) newspaper Vistnam had room for more e-commerce development thanks to the high level of internet use among its population.
The number of internet users in the country is expected to reach nearly 60 million in the next four years, and e-commerce is expected to grow at an annual rate of 30 to 50 per cent. The development of smart phones and e-wallet technologies has contributed to this growth.
Experts worry that online purchases will supplant in-person transactions and make it hard for commercial centres to stay in business.
For example, the Pearl Plaza Commercial Centre in HCM City has seen its number of vacancies rise, while none of the fifth floor of Van Hanh Mall is leased.
The office space real estate segment, meanwhile, has benefited from the rise of e-commerce.
According to a report by CBRE Viet Nam, rental prices in HCM City office buildings have continuously increased. Third-quarter prices across the board were higher than in the previous quarter.
A-grade office rent posted a third quarter increase of 7 per cent, representing a 17 per cent annual rise. New buildings are being fully leased very quickly, causing a shortage and driving up prices. B-grade office rent also increased, rising 7.3 per cent over the previous year.
Monthly rent for a-grade office space was US$43 per square metre, while B-grade office space went for $23 per square metre. Office vacancy rates remained below 5 per cent.
Another study by commercial real estate development firm JLL Vietnam showed most of the new renters are IT companies. The study predicts technology groups will occupy 15 to 25 per cent of total rentable office space within the next decade, representing a huge increase over the 5 to 10 per cent they occupied over the past three years.
Five years ago, HCM City had the third most technology companies of any city in the region, trailing only Manila and Singapore.
Things have changed over the past three years. HCM City has surpassed Bangkok, Jakarta, Kuala Lumpur, Manila and Singapore to attract the most technology firms of any city in the region.
“Nowhere is the technology sector’s increasing demand for office space more evident than in Vietnam,” said Stephen Wyatt, general manager of JLL Vietnam. “The country is catching up with the rapid development of other regional markets thanks to its young, dynamic, tech-savvy business people.”